Oil passes $130 for the first time
Pastor Dale Morgan
Oil passes $130 for the first time*
Crude oil spikes to a new record as supply concerns and a weak dollar
continue as the main factors.
By Catherine Clifford, CNNMoney.com staff writer
May 21, 2008: 9:10 AM EDT
NEW YORK (CNNMoney.com) -- Oil prices soared past $130 a barrel for the
first time Wednesday amid continuing supply concerns and a weakening dollar.
Crude oil futures for the July contract climbed as high as $130.47 a
barrel in electronic trading before retreating below $130 by 9 a.m. ET.
The June contract expired Tuesday with crude settling at at record high
of $129.07 a barrel, up $2.02 from Monday's closing price of $127.05 a
barrel.
"Once again, there was no individual news item that caused this rally -
this is a continuation of this bull move," said Andrew Lebow, senior
broker at MF Global.
In the past year, crude oil prices have more than doubled, pushing
retail gas prices higher.
The price of a gallon of regular unleaded gasoline hit a record high for
the 14th straight day, according to AAA's Web site.
The nationwide average for a gallon of regular unleaded rose to $3.807,
up from $3.80 the previous day and up 19% from year-ago levels.
Global demand has been increasing much faster than supply. In
particular, demand for diesel fuel in China, India, the Middle East and
South America has made it very difficult for suppliers to keep pace.
Diesel fuel is being used for rail and truck transport and power
generation in developing nations, according to Lebow.
The expanding demand for diesel has made it very hard for refineries to
keep pace. "There is just not enough global diesel capacity and we have
seen that all along in 2008," said Lebow.
The weakening dollar has also contributed to the rising cost of crude
oil. Crude oil is traded in U.S. greenbacks across the globe, which
means that a less valuable dollar sends the price of crude up.
Inflation has pushed investors to sink their dollars into commodities,
such as oil, as a way to hedge against the shrinking value of their
money. On Wednesday, the euro cost $1.5750, and the dollar bought ¥103.29.
The government releases its oil inventories for the week ended May 16 at
10:30 a.m. ET Wednesday.
Analyst expected crude oil stocks to be up 900,000 barrels, gasoline
stocks to be up 500,000 barrels, and distillates stocks to be up 1.45
million barrels according to a survey from Platts, an energy research firm.
Analysts are looking for refinery utilization to be up 0.6 percentage
point to 87.2% capacity.
The increase in the price of crude has far outstripped the price of
gasoline in the past year. At the same time, global demand for
distillates, which are used to make heating oil and diesel fuel, has
increased the price of diesel, making it more profitable for refineries
to make distillates than gas.