May 22, 2008 in Business

Price of oil surges past $134 per barrel

John Wilen Associated Press
 
The Spokesman-Review photo

Mahesa Kumar pumps gas in Portland after changing the price of premium gasoline to more than $4 a gallon on the marquee Wednesday. Crude oil prices reached a staggering $134.15 a barrel Wednesday in after-hours trading on the New York Mercantile Exchange.
(Full-size photo)

NEW YORK – Runaway oil prices blew past $130 a barrel for the first time Wednesday and kept going, while gasoline prices persisted in their own relentless climb, rising above $3.80 a gallon. Supply worries, rising demand and a slumping dollar are conspiring to make filling up the car – and paying for just about everything else – a growing burden for Americans.

With gas and oil prices setting new records on a daily basis, many analysts are beginning to wonder whether anything can stop prices from rising. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to crude’s rally.

Oil’s Wednesday rally was fed in part by a report from the Energy Department’s Energy Information Administration, which said crude inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase.

Light, sweet crude for July delivery rose $4.19 to settle at $133.17 a barrel on the New York Mercantile Exchange, but prices rose as high as $134.15, up $5.17, in after-hours electronic trading. It was crude’s largest one-day price advance since March 26.

Investors seized on the inventory report to boost prices Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say.

“Even if this report was bearish, with the momentum the way it is right now, it wouldn’t matter,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Crude prices first passed $130 overnight on concerns about demand and a weaker dollar. Analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.

The dollar, meanwhile, weakened against the euro Wednesday. Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.

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