OIL yesterday climbed to the highest level this year on expectations that supplies will tighten in the spring.
Benchmark US crude rose 93 US cents yesterday to end the week at US$103.24 per barrel in New York. That eclipsed the previous high for the year of US$103.22 set on Jan. 4. Brent crude, an international benchmark that already has surged this year, fell by 53 US cents to finish at US$119.58 per barrel in London as investors locked in profits.
Traders think that oil supplies from the Middle East could slow, if Iran continues to clash with Western nations over its nuclear energy program. The European Union, which buys 18 percent of Iranian oil exports, plans to embargo Iranian oil this summer. Iran says it might stop sales to Europe before then.
Meanwhile, banks are helping to slow Iranian oil sales by restricting the flow of cash that could be directed to Iran's nuclear program, which the West fears may be building a bomb. Iran gets about half of its revenue from oil.
"When Brent gets north of US$120, it starts to inspire some fear" among investors that the prices have risen too high, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Brent is used by some US refiners to produce gasoline, which is at a record high for this time of year. Retail gasoline prices in the US rose less than a penny to a national average of US$3.53 per gallon yesterday, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 15 US cents higher than it was a month ago and about 38 US cents more than a year ago.
Investors are also keeping an eye on Europe and the recovering US economy. European leaders said yesterday that they were optimistic about a second bailout for Greece, easing fears of a banking crisis that could sap energy demand.
In the US a series of economic reports this week pointed to a stronger economy and increasing demand for oil. Hot on the heels of a drop in unemployment claims reported Thursday, the government said yesterday that consumer prices rose only modestly in January and a private group's reading of future economic activity climbed in January for the fourth straight month.
In other energy trading, natural gas futures jumped by 12 US cents, or 4.6 percent, to finish at US$2.68 per 1,000 cubic feet, spurred by a government report on Thursday that said US supplies declined more than expected last week.
Heating oil fell by 2 US cents to end at US$3.1889 per gallon. Gasoline futures fell 3 US cents to finish at US$3.02 per gallon.