Summer driving looking up
HOUSTON (AP) -- While crude flirted with $70 a barrel Tuesday, gasoline prices failed to rise overnight for the first time in 42 days, signaling a possible break for motorists as summer driving shifts into high gear.
Benchmark crude for July delivery rose $1.26 to $69.35 a barrel in trading on the New York Mercantile Exchange. Oil briefly crossed the $70 mark last week for the first time since October.
Meanwhile, retail pump prices have risen steadily since late April to a national average of near $2.62 a gallon. The pace at which gasoline prices spiked throughout May caught many forecasters off guard. Still, compared with last summer, gasoline is a bargain.
This week last year, gas crossed the $4 barrier for the first time during crude's historic run toward $150 a barrel.
On Tuesday, the average national retail price flattened at $2.619, according to auto club AAA, Wright Express and Oil Price Information Service. That marked the first time since April 28 prices haven't risen overnight.
In the past month alone, gas prices have jumped more than 40 cents a gallon.
Fred Rozell, retail pricing director at the Oil Price Information Service, said part of the run-up can be linked to signs of a stabilizing economy, but there's no ignoring that fuel demand remains weak. Demand fell again at the end of May, according to the Energy Department. Also, refiners have begun at least somewhat to crank up production in recent weeks after months of scaling back.
"We probably had a mini-bubble here and, like all bubbles, they tend to go beyond what they should," Rozell said. "That doesn't mean prices won't start marching up again this week, but a lot of people are scratching their heads about why we've seen prices run up as much as they have."
Crude prices are rising because of an influx of money from Wall Street. Investors have used oil and other commodities as a hedge against a weak dollar. The dollar has fallen in large part because of the billions the government has spent on corporate bailouts, and that has attracted enormous sums of money to the oil markets.
The dollar, which fell further Tuesday against the pound and the euro, "seems to be driving the price of oil again," said Phil Flynn, an analyst at Alaron Trading Corp.
Crude touched above $70 a barrel last week, the highest since October. Just how long a weak dollar can support prices like that, with the economy still in recession, is questionable. Crude in storage remains near record highs and demand in the U.S., the world's largest consumer of oil, is sluggish.
But there are signs the global economy is improving. China's passenger car sales shot up nearly 47 percent in May from a year earlier, buoyed by tax cuts and other government incentives, the China Association of Automobile Manufacturers reported Tuesday.
Wednesday's release of petroleum inventory data from the Energy Department's Energy Information Administration could provide additional insight about crude demand. Analysts expect a rise of 800,000 barrels.
These days, "it's just a market that goes up easier than it goes down," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "It's the opposite of a few months ago when oil seemed to fall on any kind of news," he said.
In other Nymex trading, gasoline for July delivery rose 1.1 cents to $1.947 a gallon and heating oil rose 2.9 cents to $1.797. Natural gas for July delivery fell 3.1 cents to $3.70 per 1,000 cubic feet.
In London, Brent prices gained $1.30 to $69.18 a barrel on the ICE Futures exchange.
(Copyright ©2009 by The Associated Press. All Rights Reserved.)
