Oil prices fell Thursday from record levels after a government report showed that the nation's crude oil supplies rose more than expected last week.
At the pump, meanwhile, nationwide gas prices rose more than 3 cents overnight, a jump that could be a prelude to a much bigger price spike this spring.
In Houston, the average retail price was $2.972 a gallon, up 12.7 cents this week, according to the weekly AAA Texas gasoline price survey.
The inventory report from the Energy Department's Energy Information Administration was mixed. While crude oil inventories rose by 4.2 million barrels last week, more than the 2.9 million-barrel increase analysts surveyed by Dow Jones Newswires had expected, supplies of distillates, which include heating oil, fell by 4.5 million barrels, much more than the 1.5 million-barrel forecast.
Traders chose to focus on the crude number. Many analysts believe rising supplies and the falling demand noted in a number of recent reports means oil prices will eventually fall.
But they've been wrong before. Indeed, prices have spiked in recent days on buying fueled in part by investors attracted to the oil market by the falling dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
A battle over these differing points of view is playing out in the oil markets, fueling price volatility. "There's just a lot of widely divergent opinions on the market right now," said Tim Evans, an analyst at Citigroup.
Light, sweet crude for April delivery fell $1.47 to settle at $98.23 a barrel on the New York Mercantile Exchange, after earlier alternating between gains and losses. March oil rose to a settlement record of $100.74 and a trading record of $101.32 before expiring Wednesday.
Meanwhile, retail gas prices rose 3.3 cents Thursday to a national average of $3.086 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, are moving higher partly in response to oil's rise, but also because stations in many parts of the country are beginning to switch over from winter-grade gasoline to more expensive summer-grade gas.
Summer-grade gasoline, which has additives designed to reduce pollution, trades as much as 15 cents higher than winter-grade gasoline on the futures market.
Retailers are gradually raising their prices to make up for the difference, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
While the government doesn't require summer fuel to be sold until June 1, most stations switch over far earlier to make sure their pumps and tanks are clear of winter-grade gas by that time, Kloza said. The Energy Department and many analysts expect gas prices to peak this spring well above last May's record of $3.227 a gallon. Estimates of how high prices will go range from $3.40 a gallon to nearly $4. On Thursday, March gasoline futures fell 6.32 cents to $2.522 a gallon and March heating oil futures fell 1.65 cents to settle at $2.7381 a gallon.
March natural gas futures rose 7.4 cents to settle at $8.891 per million British thermal units after the Energy Department, in a separate report, said inventories fell by 172 billion cubic feet last week, in line with expectations.
In London, April Brent crude futures fell $2.18 to settle at $96.24 a barrel.
At the pump, meanwhile, nationwide gas prices rose more than 3 cents overnight, a jump that could be a prelude to a much bigger price spike this spring.
In Houston, the average retail price was $2.972 a gallon, up 12.7 cents this week, according to the weekly AAA Texas gasoline price survey.
The inventory report from the Energy Department's Energy Information Administration was mixed. While crude oil inventories rose by 4.2 million barrels last week, more than the 2.9 million-barrel increase analysts surveyed by Dow Jones Newswires had expected, supplies of distillates, which include heating oil, fell by 4.5 million barrels, much more than the 1.5 million-barrel forecast.
Traders chose to focus on the crude number. Many analysts believe rising supplies and the falling demand noted in a number of recent reports means oil prices will eventually fall.
But they've been wrong before. Indeed, prices have spiked in recent days on buying fueled in part by investors attracted to the oil market by the falling dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
A battle over these differing points of view is playing out in the oil markets, fueling price volatility. "There's just a lot of widely divergent opinions on the market right now," said Tim Evans, an analyst at Citigroup.
Light, sweet crude for April delivery fell $1.47 to settle at $98.23 a barrel on the New York Mercantile Exchange, after earlier alternating between gains and losses. March oil rose to a settlement record of $100.74 and a trading record of $101.32 before expiring Wednesday.
Meanwhile, retail gas prices rose 3.3 cents Thursday to a national average of $3.086 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, are moving higher partly in response to oil's rise, but also because stations in many parts of the country are beginning to switch over from winter-grade gasoline to more expensive summer-grade gas.
Summer-grade gasoline, which has additives designed to reduce pollution, trades as much as 15 cents higher than winter-grade gasoline on the futures market.
Retailers are gradually raising their prices to make up for the difference, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
While the government doesn't require summer fuel to be sold until June 1, most stations switch over far earlier to make sure their pumps and tanks are clear of winter-grade gas by that time, Kloza said. The Energy Department and many analysts expect gas prices to peak this spring well above last May's record of $3.227 a gallon. Estimates of how high prices will go range from $3.40 a gallon to nearly $4. On Thursday, March gasoline futures fell 6.32 cents to $2.522 a gallon and March heating oil futures fell 1.65 cents to settle at $2.7381 a gallon.
March natural gas futures rose 7.4 cents to settle at $8.891 per million British thermal units after the Energy Department, in a separate report, said inventories fell by 172 billion cubic feet last week, in line with expectations.
In London, April Brent crude futures fell $2.18 to settle at $96.24 a barrel.
Source: Associated Press |By JOHN WILEN
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