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Oil surpasses $125 per barrel ahead of US driving season

Posted: 2008-05-09 06:56:57

AP Photo CAMS104

By PABLO GORONDI

Associated Press Writer

Oil prices surged past $125 per barrel Friday on the eve of the U.S. driving season as a weakening U.S. dollar drove investors to snap up commodities.

Light, sweet crude for June delivery rose as high as $125.12 a barrel in electronic trading on the New York Mercantile Exchange at midday before falling back to $124.86 by early afternoon in Europe.

On Thursday, the contract rose to a record close of $123.69 a barrel.

In London, Brent crude contracts also hit record highs before slipping and traded up $1.13 on the day at $123.97 a barrel on the ICE Futures exchange. Earlier Friday, Brent had reached $124.25 before falling back.

On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia's government, heightening chances that the U.S. could impose sanctions on one of its biggest oil suppliers as a state sponsor of terror.

Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela's leader to arm guerillas.

Comments Thursday from European Central Bank president Jean-Claude Trichet signaling that the bank was unlikely to consider interest rate cuts helped strengthen the euro against the U.S. currency.

By midday in Europe, the euro stood at $1.5466 compared to $1.5404 in late trading Thursday night in New York. The dollar was also weaker Friday against the British pound and the Japanese yen.

Investors view commodities such as oil as a hedge against inflation, and some analysts think the dollar's protracted decline is the main reason behind oil prices doubling from a year ago. Also, a weaker dollar makes oil cheaper to investors overseas.

A prediction by analysts at Goldman Sachs seeing oil rising as high as $150 to $200 a barrel within two years also has boosted prices.

Analysts, however, struggled to explain the continued rise of oil futures after a larger-than-expected build in crude oil stocks reported Wednesday in the United States.

Some pointed to a small decline in distillate stocks, which include diesel and heating oil and normally drive prices during the Northern Hemisphere winter; others said speculation and computer-generated buying was keeping oil prices high.

"Crude oil is currently held up in a tug-of-war between the Goldman reality and the physical reality," said Olivier Jakob of Switzerland's Petromatrix in a research note, adding that the investment bank's prediction made for "a great story to support pension funds piling more into commodities."

Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne, Australia, said it may be a combination of continued wariness over potential supply disruptions as well as prospects for a strengthening in crude demand heading into the U.S. summer driving season.

"U.S. gasoline stocks have certainly dropped quite sharply over the last month," he said. "What'll happen in the near term is that we may likely see an uptick in U.S. refining capacity to rebuild gasoline stocks and we may see a short-term build in crude demand as a result."

Computer files retrieved from the laptop of a top guerrilla suggested broader and deeper ties between Venezuela's leader and the Revolutionary Armed Forces of Colombia than has been reported in the past, The Wall Street Journal reported Friday.

Ties between the U.S. and Venezuela are already strained. Chavez has said the computer files are fakes.

Prices may also be getting a boost from comments Thursday by the OPEC secretary general.

Abdalla Salem El-Badri on Thursday reiterated his position that oil supplies are adequate. He said several Organization of Petroleum Exporting Countries oil projects are coming on line, but he noted that several member countries are having a hard time finding buyers for their additional supplies.

In other Nymex trading, June gasoline futures rose 1.92 cents to $3.1570 a gallon, while heating oil futures rose 3.02 cents to $3.54 a gallon. Natural gas futures rose 5.1 cents to US$11.314 per 1,000 cubic feet.

AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

05/09/08 06:52 EDT

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187 comments

ShawPinEd 01:17:56 PM May 09 2008

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if anyones interested , i have written a book ,its, called 1001 excuses from ********* to horse ***** anyreason to hike up the price of gas , ?subject to change of course

wets4202tk 12:05:53 PM May 09 2008

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why do we need more production in oil we have enough our refineries cant crack any more gas. we americans have to start going to solar power electric if possible and change our wasteful habits. we want gas cheep so we can can be comfordable we need better mass transit more carpooling in electric cars screw the oil change nobody likes change but we have to bush has said we need to change if we the people dont it wont work
and besides Bush family makes money on building new ways of production and not oil

wets4202tk 11:55:46 AM May 09 2008

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If americans will stop clinging to parties and look at the people running we may get them to put up a person who can help.Quit being like sheep and do your home work on these yoyos.turn off the tv and stop noding your head at what you here and think. we keep doing what we are doing gas will be 15.00 gallon food will go out the roof and your jobs will be no more...Quit thinking that because a person stands up and speaks he or she is telling you the truth.they know most americans dont listen and only hear what they want so they give us lip service.

BMMcElreath 11:50:46 AM May 09 2008

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Take the gloves off and increase domestic production. Drill off shore and in Alaska.

BMMcElreath 11:49:56 AM May 09 2008

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Increase domestic production.

BMMcElreath 11:49:29 AM May 09 2008

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In the 70's and early 80's the oil fields of USA were employing many people. Cheep oil put and gov. regulations shut them down. Bring back domestic production. More competition will bring down prices and strengthen the USA.

wets4202tk 11:46:31 AM May 09 2008

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I here change change change but where is the real numbers where is the plan in real facts anyone can say we need change but change to what become like rag heads and have a country like them I dont think so. before we rally behind someone lets find out what kind of change in real terms we are going to change all I here is lip service....America was built by the people not by goverment more goverment more control they have on our lives...Its time to demand from these yoyos to put up a real plan so we can see it not lip service.. be careful on what you ask for.

Yesreebob 11:27:21 AM May 09 2008

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IT'S ALL BULL **** JUST ANOTHER WAY TO RIP US OFF

Mayabelle1107 11:21:58 AM May 09 2008

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Atleast AOL recognizes Farakhan as a dirty word....

Toni Medford 11:21:54 AM May 09 2008

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There is noticeably less traffic on I-75 near Gainesville, Florida. Big trucks are going much slower and drafting off each other more. Gas costs over $11.00 per gallon in England and other places. We need to stop complaining and put more effort into changing our consumption habits. Use that energy wasted in complaining to putting thought into how and what you can do to adjust to the changes we all face. Extensive road travel and vacations are a modern concept. Look to days gone by and find solutions you can live with and still have fun and prosper. Where's that American Pioneer Spirit? Have we become too diluted to see our way out of this and into the future? God, I hope not.

1 - 10 of 187

187 comments