Oil sets new trading record above $147 a barrel
Traders work the crude oil options pit at the New York Mercantile Exchange Friday, July 11, 2008 in New York. Oil prices spiked to a new record above $147 a barrel Friday, as rising hostilities between the West and Iran and the potential for attacks on Nigerian oil facilities gave investors reason to rush back into the energy markets. (AP Photo/Mary Altaffer) (Mary Altaffer - AP)
By MADLEN READ The Associated Press Friday, July 11, 2008; 2:21 PM
Traders work the crude oil options pit at the New York Mercantile Exchange Friday, July 11, 2008 in New York. Oil prices spiked to a new record above $147 a barrel Friday, as rising hostilities between the West and Iran and the potential for attacks on Nigerian oil facilities gave investors reason to rush back into the energy markets. (AP Photo/Mary Altaffer) (Mary Altaffer - AP)
By MADLEN READ The Associated Press Friday, July 11, 2008; 2:21 PM
NEW YORK -- Oil prices briefly spiked to a new record above $147 a barrel Friday, as rising hostilities between the West and Iran and unrest in Nigeria sent investors rushing back to energy markets.
A decline in the U.S. dollar and concerns about an oil worker strike in Brazil contributed to the higher price.
The resurgence in crude prices stokes concern that $4-a-gallon gasoline is here to stay for U.S. drivers and means home heating could get much more expensive this winter.
Heating oil futures surged on the New York Mercantile Exchange to a record of more than $4.15 a gallon. Natural gas futures turned lower, but are still about twice as high as a year ago.
"If you think your gasoline bills are expensive now, wait till you get your home heating bill this winter," said Stephen Schork, an analyst and trader in Villanova, Pa.
While U.S. consumer demand for gasoline is waning as people try to save money, other factors are keeping energy costs high: The weak dollar, refineries cutting back on production and resilient demand for diesel fuel. Diesel is a distillate fuel produced and distributed similarly to heating oil, so diesel demand often affects the price of heating oil.
The other big reason gasoline and heating bills are likely to stay high is unrest in the Middle East and Africa.
Iran, which has long been under U.N. scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel. On Thursday, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran.
On Friday, there were rumors of Israeli military exercises taking place in Iraqi airspace, which were reportedly denied by Israeli officials.
"The war of words is quite heated," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass. "And it raises the possibility of some serious problems in the area _ either the cutoff of Iranian exports, or Iranian strikes on tankers in the Strait of Hormuz."
About 40 percent of the world's tanker traffic passes through the Strait of Hormuz.
A decline in the U.S. dollar and concerns about an oil worker strike in Brazil contributed to the higher price.
The resurgence in crude prices stokes concern that $4-a-gallon gasoline is here to stay for U.S. drivers and means home heating could get much more expensive this winter.
Heating oil futures surged on the New York Mercantile Exchange to a record of more than $4.15 a gallon. Natural gas futures turned lower, but are still about twice as high as a year ago.
"If you think your gasoline bills are expensive now, wait till you get your home heating bill this winter," said Stephen Schork, an analyst and trader in Villanova, Pa.
While U.S. consumer demand for gasoline is waning as people try to save money, other factors are keeping energy costs high: The weak dollar, refineries cutting back on production and resilient demand for diesel fuel. Diesel is a distillate fuel produced and distributed similarly to heating oil, so diesel demand often affects the price of heating oil.
The other big reason gasoline and heating bills are likely to stay high is unrest in the Middle East and Africa.
Iran, which has long been under U.N. scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel. On Thursday, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran.
On Friday, there were rumors of Israeli military exercises taking place in Iraqi airspace, which were reportedly denied by Israeli officials.
"The war of words is quite heated," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass. "And it raises the possibility of some serious problems in the area _ either the cutoff of Iranian exports, or Iranian strikes on tankers in the Strait of Hormuz."
About 40 percent of the world's tanker traffic passes through the Strait of Hormuz.
On Friday, light, sweet crude for August delivery soared to an all-time high of $147.27 a barrel, then retreated to trade at $144.42, up $2.77, by midafternoon.
Crude had fallen by nearly $10 a barrel over two days at the start of the week, but rebounded by more than $5 a barrel Thursday as anxiety heightened about Middle East and Nigerian supplies being disrupted.
The Organization of Petroleum Exporting Countries warned Thursday it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market.
Also Thursday, Nigeria's main militant group said it would resume attacks in the oil-rich region because of Britain's recent vow to back the government in the conflict there. Over the past two years, attacks have lowered the nation's typical daily oil output by a quarter.
JBC Energy in Vienna, Austria, said the news about Iran and Nigeria _ as well as a reported threat of a strike by oil workers in Brazil _ were "enough to wake the market from its two-day slumber."
Meanwhile, the dollar weakened against other major currencies Friday. Because oil is bought and sold in dollars, oil's rise has not been as severe for countries with stronger currencies; meanwhile, traders have been using commodities as a hedge against the tumbling dollar.
In Nymex trading, heating oil futures rose to a trading record of $4.1586 before retreating to $4.0750 a gallon, up 3.71 cents.
Gasoline futures also rose to a new trading record of $3.631 a gallon before easing back to $3.5405, up 2.96 cents.
The average U.S. retail price for gasoline was at $4.096 a gallon, down slightly from the record $4.108 a gallon reached on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Natural gas futures fell 18.3 cents to $12.117 per 1,000 cubic feet, but only after rising as high as $13.694.
Natural gas, because it is not a crude oil product, is inexpensive compared to heating oil. But as the winter approaches, the fuel has the potential to shoot higher as energy traders look for cheaper places to put their money, Schork said.
Heating oil is used mostly in the Northeast United States; homes in most other regions of the country use natural gas.
It's possible for people to save some money on heating, but it's not easy to slash the bill significantly.
"We've been building these ridiculous McMansions over the past few years. It's harder to trade in a McMansion than it is an SUV," Schork said. "But you can turn your thermostat down and throw on a sweater."
____
Associated Press Writers Pablo Gorondi in Budapest, Hungary, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
Crude had fallen by nearly $10 a barrel over two days at the start of the week, but rebounded by more than $5 a barrel Thursday as anxiety heightened about Middle East and Nigerian supplies being disrupted.
The Organization of Petroleum Exporting Countries warned Thursday it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market.
Also Thursday, Nigeria's main militant group said it would resume attacks in the oil-rich region because of Britain's recent vow to back the government in the conflict there. Over the past two years, attacks have lowered the nation's typical daily oil output by a quarter.
JBC Energy in Vienna, Austria, said the news about Iran and Nigeria _ as well as a reported threat of a strike by oil workers in Brazil _ were "enough to wake the market from its two-day slumber."
Meanwhile, the dollar weakened against other major currencies Friday. Because oil is bought and sold in dollars, oil's rise has not been as severe for countries with stronger currencies; meanwhile, traders have been using commodities as a hedge against the tumbling dollar.
In Nymex trading, heating oil futures rose to a trading record of $4.1586 before retreating to $4.0750 a gallon, up 3.71 cents.
Gasoline futures also rose to a new trading record of $3.631 a gallon before easing back to $3.5405, up 2.96 cents.
The average U.S. retail price for gasoline was at $4.096 a gallon, down slightly from the record $4.108 a gallon reached on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Natural gas futures fell 18.3 cents to $12.117 per 1,000 cubic feet, but only after rising as high as $13.694.
Natural gas, because it is not a crude oil product, is inexpensive compared to heating oil. But as the winter approaches, the fuel has the potential to shoot higher as energy traders look for cheaper places to put their money, Schork said.
Heating oil is used mostly in the Northeast United States; homes in most other regions of the country use natural gas.
It's possible for people to save some money on heating, but it's not easy to slash the bill significantly.
"We've been building these ridiculous McMansions over the past few years. It's harder to trade in a McMansion than it is an SUV," Schork said. "But you can turn your thermostat down and throw on a sweater."
____
Associated Press Writers Pablo Gorondi in Budapest, Hungary, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
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