CRUDE oil futures inched higher yesterday, reversing earlier losses triggered by the dollar's recovery against the euro and lower demand projections. Retail gasoline prices in the US, however, continued their march to new records.
Light, sweet crude for May delivery rose 3 cents to settle at US$110.14 on the New York Mercantile Exchange after losses earlier in the day. But it remained about US$2 per barrel shy of the record US$112 a barrel set Wednesday on the back of an unexpected decline in US crude inventories.
The contract had slipped Thursday, and analysts attributed the tepid performance over the last couple of days to traders looking to lock in their gains from strong prices before the weekend.
"The main thing I see is just profit-taking after we ran things up to a record high," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. "There's a strong possibility we'll see new record highs again next week."
Crude prices also came under pressure most of the day yesterday after the International Energy Agency lowered its global oil demand forecast for the year by 310,000 barrels a day to 87.2 million barrels a day, citing lower economic output expectations in the US and elsewhere.
"The suspicion is it's not just the US that's going to see a slowdown," said Tom Kloza of the Oil Price Information Service in Wall, New Jersey. "I think it's significant, but I also think the would-be sellers ... are probably not yet convinced."
The US dollar strengthened against the euro and the pound, also putting pressure on oil prices for much of the session.
Crude oil's recent run above US$100 a barrel has been largely attributed to the steadily depreciating US currency. A weakening dollar attracts investors to commodities as a hedge against inflation, but when the dollar rises, the effect tends to reverse as oil also becomes more expensive to investors overseas.
More negative US economic data also appeared to have taken steam out of oil's precipitous price rise this week. The Commerce Department reported the first decline in oil imports in a year _ a possible sign that high prices and an economic downturn were hurting crude sales.
Retail gasoline and diesel prices in the US, however, rose to another record yesterday, piling on the costs for motorists as well as everyday consumers reliant on trucks, trains and ships to deliver food and other goods to the market.
Gas prices at the pump edged higher overnight, adding 0.8 cents to 3.365 a gallon, according to AAA and the Oil Price Information Service. The increase is the latest in a series of records in recent weeks, and leaves US drivers paying 56 cents more a gallon now than they did a year ago.
The May gasoline futures contract rose by 1.52 cents to settle at US$2.8073 a gallon.
Analysts expect gasoline prices may move even higher with the arrival of the peak summer driving season in the US and refineries complete their conversion to more expensive summer-grade fuel. It is unclear how far prices will go, however, because a bigger fuel bill could convince drivers to cut back.
"I still do not believe there's enough strength in demand that it's going to justify that move to US$4 a gallon" nationwide, said Kloza. Some analysts have predicted gasoline could move that high.
Retail diesel prices rose 2.1 cents to US$4.066, topping the previous high set a day earlier. The spike in the key transportation fuel is significant because it affects the cost of a wide range of goods _ meaning that even Americans who do not drive will feel the pinch.
"There's just not enough supply to meet demand ... and that's driving prices higher," Ritterbusch said or diesel's surge.
In other Nymex trading yesterday, heating oil futures rose 0.35 cent to settle at US$3.1975 a gallon, and natural gas futures slipped by 20.9 cents to US$9.889 per 1,000 cubic feet.
In London, Brent crude futures rose 55 cents to settle at US$108.75 a barrel on the ICE Futures exchange.