Apr 21, 2006 3:25 pm US/Pacific
Oil Prices Set New Record
NEW YORK (CBS) ―
Crude-oil prices broke through $75 a barrel to hit a new record Friday, fueled by concerns about Iran's nuclear ambitions and tight U.S. gasoline supplies.
Crude prices, which are more than 40 percent higher than a year ago, have risen 8.4 percent from Thursday's closing price — the biggest weeklong jump since the week ended June 17, 2005, when crude futures rose 9 percent.
And pumps ran dry at scattered gas stations as fuel terminals and stations struggled to adapt to ethanol in fuel mixes, causing some customers to hark back to widespread gasoline shortages of the past.
Catherine Rossi, a spokeswoman for AAA Mid-Atlantic, said she knew of eight stations in the Philadelphia region that were out of fuel on Thursday. Four of the 40 stations Liberty supplies in the Philadelphia region ran out of fuel in the last two days as its tanker trucks made futile trips from terminal to terminal, Hummel said.
Analysts say oil prices are likely to climb even higher in the weeks ahead as worries grow about how international pressure on Iran, OPEC's No. 2 oil producer, will affect its crude output. Rebel disruptions of oil production in Nigeria, the fifth-biggest source of U.S. oil imports, also pose a risk to supply.
"You put all these headlines together, you see the situation is getting charged up and getting out of control. That's why oil traders and speculators are having a field day — this is exactly the kind of environment that speculators want to operate in," said Oppenheimer & Co. oil analyst Fadel Gheit.
Light, sweet crude for June delivery rose $1.48 to settle at a record $75.17 a barrel Friday on the New York Mercantile Exchange, after peaking at an all-time trading high of $75.35. The May contract, which expired Thursday, had settled at $71.95 on Thursday.
Accounting for inflation, prices are still about 20 percent below the records reached about 25 years ago.
Traders worry that U.S. gasoline supplies may not meet summer demand after seven straight weeks of drops in domestic gasoline stocks, which are now at their lowest level since November.
"There are a lot of people that were disturbed with this week's energy numbers," said Alaron Trading Corp. analyst Phil Flynn, referring to the U.S. inventory figures. "There seems to be a lot of concern that the combination of the geopolitical issues, as well as refining issues, are enough reason not to abandon the long side of this market just yet."
U.S. refineries are performing seasonal maintenance on a greater scale this year, given the destruction wrought by last fall's hurricanes that battered the Gulf Coast. Also, the transition from gasoline additive MTBE, found to be a groundwater pollutant, to ethanol is creating additional fears about an already tight gasoline market.
Friday afternoon, U.S. Energy Secretary Samuel Bodman said phasing out MTBE could be complicated, and that there is no simple solution to lowering oil prices.
At this point, there is no peak in sight.
"Everyone's asking, 'What's the high? What's the high?' In a runaway bull market, you can't say. But the market will stop climbing when it finally starts to have an impact on the economy and on demand. I don't see it stopping till we reach that point," said BNP Paribas commodity futures analyst Tom Bentz.
So far, demand has not been crimped significantly, encouraging traders to keep buying into the market.
"Demand continues to be relatively strong. Supply remains tight. And the global economy seems to be doing OK. As they say, no harm, no foul," Gheit said, noting that not just oil companies, but also big financial institutions have been making billions of dollars on soaring energy prices.
In related news:
• Brent crude on London's ICE Futures exchange rose $1.39 to settle at $74.57 a barrel Friday.
• Gasoline futures rose 2.32 cents to settle at $2.2380 a gallon, while heating oil rose 2.26 cents to settle at $2.0762 a gallon. Natural gas slipped 8.3 cents to settle at $7.981 per 1,000 cubic feet.
• The United States and Britain say if Iran does not comply with the Security Council's April 28 deadline to stop uranium enrichment, they will seek a resolution that would make the demand compulsory. Iran has consistently resisted calls to abandon its enrichment program.
• In Nigeria, militants exploded a car bomb inside a military base late Wednesday, in their first major attack since February. This year, the group has cut more than 20 percent of Nigeria's daily oil exports of 2.5 million barrels.
• On Saturday, energy ministers of the Organization of Petroleum Exporting Countries will meet in Qatar to discuss the latest developments in the oil market, said United Arab Emirates energy minister Mohammed Dhaen al-Hamili.
(© 2006 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
