Gasoline and oil prices extended their record-setting streaks Wednesday, with gas at the pump reaching a new high of nearly $3.25 and crude surpassing $110 for the first time.
The gains came as a weakening dollar led investors to shrug off an Energy Department report that crude oil and gasoline supplies jumped last week.
The national average price of a gallon of regular gas rose by 1.9 cents overnight to $3.246 a gallon, a record, according to AAA and the Oil Price Information Service. Pump prices are following crude's recent surge, and could rise as high as $3.75 a gallon this spring, analysts say.
Meanwhile, light, sweet crude for April delivery rose $1.17 to settle at a record $109.92 a barrel on the New York Mercantile Exchange after earlier rising to a new trading record of $110.20.
The dollar weakened throughout the day Wednesday, setting a number of new lows against the euro and attracting new buyers to the oil market. 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 dollar is weak. Many analysts believe the dollar's decline is the reason crude futures have surged to records in 12 of the past 13 sessions, despite the fact that crude supplies have risen 10.2% since early January.
"It's almost like people are worried they're going to miss the ... train," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos., of investors' dollar driven enthusiasm for oil futures.
For consumers also facing rising food prices and a drop in housing values, the dollar-fed oil rally simply means more pain at the pump. Analysts see little reason for the dollar to stop falling, or for oil and gas prices to stop rising, any time soon. And with gas prices certain to rise as the summer driving season approaches, consumers will be even more cash-strapped.
In part, the dollar is falling in anticipation of another interest rate cut by the Federal Reserve next week. Lower rates tend to weaken the dollar.
The importance of dollar weakness to crude prices is reflected in the fact that oil's latest record came the same day the Energy Department's Energy Information Administration said crude supplies jumped by 6.2 million barrels last week, more than three times the 1.6 million barrel forecast of analysts surveyed by Dow Jones Newswires. The EIA also reported that gasoline supplies rose by 1.7 million barrels last week, well above the expected 300,000 barrel increase, and distillate supplies dropped by 1.2 million barrels, less than the expected 2 million barrel decline.
It was the eighth increase in crude supplies in nine weeks, putting oil inventories back on a growth track after a one-week decline. Meanwhile, forecasters including the Energy Department, the International Energy Agency and OPEC have consistently reduced their demand growth predictions for this year.
Wednesday's EIA report offered more evidence demand is falling: Gasoline consumption fell 0.7% last week compared to the same week last year. Normally, gas consumption grows about 1.5% year-over-year, just to keep pace with population growth.
"Product demand remains quite weak," said Tim Evans, an analyst at Citigroup Inc., in a research note. "This was another set of consistently bearish data."
Yet negative supply and demand fundamentals don't seem to matter to oil investors as long as the dollar keeps falling.
In other Nymex trading Wednesday, April gasoline futures rose 0.25 cent to settle at $2.7286 a gallon on the Nymex, and April heating oil futures rose 2.87 cents to settle at a record $3.0244 a gallon.
April natural gas futures rose 1.1 cents to settle at $10.011 per 1,000 cubic feet.
In London, April Brent crude futures rose $1.02 to settle at $106.27 a barrel on the ICE Futures exchange.
(AP)
Your Ads At Here