Oil prices rise amid world supply fears

Posted: April 09, 2011

NEW YORK - Oil surged above $112 per barrel Friday after a drop in the dollar and continued jitters about shipments from the world's major oil suppliers.

Benchmark West Texas Intermediate for May delivery jumped $2.49, or 2.3 percent, to settle at $112.79 per barrel on the New York Mercantile Exchange. Crude oil set new 30-month highs nearly every day this week.

Analysts said oil moved higher as the dollar plunged against other major currencies. Oil is traded in dollars and tends to rise when the greenback falls and makes crude cheaper for investors holding foreign currency.

Oil also climbed on fears that violence in Nigeria ahead of the country's national election this weekend could lead to supply interruptions. And in Venezuela a massive blackout appears to have affected some refineries, analysts said. The two countries supply a combined two million barrels of oil per day to the United States.

If crude prices keep rising, experts say, gasoline prices could hit $4 a gallon across the country this summer.

Pump prices Friday averaged $3.74 a gallon nationwide, up from $3.07 at the neginning of the year, AAA said. The swift rise forced the Oil Price Information Service to boost its retail gasoline price forecast to a range of between $3.75 and $4 per gallon this year. OPIS chief oil analyst Tom Kloza said it might not be long before the national average tests the all-time record of $4.11 per gallon set in July 2008.

Oil and gasoline prices began a steady rise in February, as the Libyan rebellion shut down the country's daily exports of 1.5 million barrels of oil. Libya produces about 2 percent of world demand, and analysts say making up for those losses will severely reduce the ability of other oil-producing countries to increase production in the future.

"The market is being forced to consider a possible major loss of Libyan barrels probably through the rest of this year and into next," analyst Jim Ritterbusch said Friday.

Experts point to several other factors that have pushed oil and gasoline to record levels. The U.S. economy added hundreds of thousands of jobs this year. That means gasoline demand could increase this year as more workers join the daily commute. And last month's devastating earthquake and tsunami in Japan put further pressure on oil prices. Japan is expected to boost oil and natural gas imports while some of its nuclear power plants are offline.

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