June 7, 2008 in Business

Oil prices take biggest one-day jump on record

Adam Schreck Associated Press
 
Associated Press photos photo

Oil pumps near Divernon, Ill., should be working around the clock as prices shot up more than $11 to top $139 a barrel Friday.Associated Press photos
(Full-size photo)

NEW YORK – Oil prices made their biggest single-day leap ever Friday – clearing $139 and raising the once-unthinkable prospect of $150 oil and even higher gas prices by the Fourth of July.

The meteoric rise of nearly $11 for the day piled atop an increase of nearly $5.50 on thursday, taking oil futures more than 13 percent higher in two days, easily a record on the New York Mercantile Exchange.

Oil surged after Morgan Stanley analyst Ole Slorer predicted that strong demand in Asia and tight supplies in the Western Hemisphere could drive prices to $150 by Independence Day, when millions of Americans take to the roads.

That means no end in sight for spiraling gas prices, already above $4 per gallon in much of the country.

Even longtime market observers were shocked by the magnitude and speed of oil’s rally.

“We’re into uncharted territory, and somewhat off the map as far as historical precedents are concerned,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

The idea of $150 oil and gasoline that will keep climbing above $4 made it clear to investors that consumers would be forced to be even more conservative than they have been in recent months.

Before Thursday, oil had receded nearly $13 a barrel from its highs, a respite from its near-record-every-day march.

The burst in oil prices also raised the prospect of accelerating inflation by adding to transportation costs – which will send prices higher throughout the economy.

Light sweet crude for July delivery finished the day at $138.54, up $10.75 on the Nymex.

But after the settlement, the contract jumped as high as $139.12. Prices hit a previous record of $135.09 a barrel on May 22, and settled Thursday at $127.79.

A further weakening of the dollar also helped send oil prices higher by enticing overseas buyers armed with stronger currencies and others looking for a hedge against the greenback. But it also represented a stampede by bullish traders and optimistic computer models betting that prices still have further to rise.

“The bulls … refuse to go away,” said Stephen Schork, an analyst and trader in Villanova, Pa.

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