Gas prices inch closer to $4; oil gyrates
Buying opportunities seen after crude costs dropped below $127 a barrel
Retail gas prices jumped a cent Friday to a new national average over $3.96 a gallon, putting them on a course to hit $4 by early next week. Oil futures, meanwhile, traded in a narrow range as investors tried to determine whether recent price declines were temporary.
At the pump, gas prices rose to a record national average of $3.962 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Gas prices keep rising despite a downturn in the oil market over the last week, and will likely soon pass the $4 mark.
“I do think we could get to $4,” said Geoff Sundstrom, a spokesman for AAA. “We could get there right in time for June 1.”
Gas prices are already higher than that in many parts of the country, and average more than $4 in 12 states and the District of Columbia.
Diesel prices are also soaring; the national average price of a gallon of diesel rose half a cent overnight to a record national average of $4.792 a gallon. Diesel prices are above $5 in some parts of the country. Because diesel is used to transport the vast majority of the goods, prices of food and consumer goods are also rising.
High prices are cutting demand for gasoline; data from the Energy Department and Federal Highway Administration and several surveys in recent days suggest American consumers are driving less. Jitters about falling demand have helped send oil prices sharply lower since they set a new record over $135 a barrel last week.
Overnight, light, sweet crude for July delivery fell below $125 a barrel before rebounding to settle up 73 cents at $127.35 on the New York Mercantile Exchange. On Thursday, prices fell $4.41, the biggest single-day price drop since March 19.
Friday’s price uncertainty reflected an ongoing battle in the oil market between investors who feel prices have risen too far, and those who think global demand and tight supplies justify prices in the $130s — or higher.
“A $4 drop just really looks like a buying opportunity to some people,” said Brad Samples, an analyst at Summit Energy Services Inc. in Louisville, Ky.
Andy Lebow, senior vice president at MF Global LLC in New York, said investors are uncertain whether the past week’s nearly $10 price decline is a correction in a bull market, or a sign that the bull market has run its course.
Additional selling pressure came from a Commodity Futures Trading Commission investigation into possible price manipulation in oil futures markets. The CFTC also announced new rules designed to increase transparency of U.S. and international energy futures markets.
But the dollar, which fell against the euro and British pound, gave investors reason to buy. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. Also, a lower dollar makes oil less expensive to investors overseas.
If oil prices fall, gas prices will eventually follow, analysts say. At the moment, there may be too much momentum left over from oil’s sharp rise in recent weeks to stop gas prices from hitting $4. On the Nymex, gasoline futures for June delivery rose to a trading record of $3.52 on Thursday; on Friday, the contract rose 0.47 cent to settle at $3.4089 a gallon. The June gasoline contract expired at the end of trading Friday; trading in expiring contracts is often volatile.
“I think (gasoline prices are) set up for a strong possibility … of a strong move above $4,” Samples said.
“Whether that becomes a price ceiling (followed by price declines) we’ll just have to wait and see,” Sundstrom said.
In other Nymex trading, June heating oil futures, which also expired Friday, fell 2.87 cents to settle at $3.6598 a gallon, and July natural gas futures rose 22.9 cents to settle at $11.703 per 1,000 cubic feet.
In London, July Brent crude rose 89 cents to settle at $127.78 a barrel on the ICE Futures Exchange.
Hurricanes vs. energy prices - May 30: CNBC’s Scott Cohn talks with MSNBC’s Contessa Brewer about the steps oil companies are taking to prepare for the hurricane season along the energy-rich Gulf coast.
Retail gas prices jumped a cent Friday to a new national average over $3.96 a gallon, putting them on a course to hit $4 by early next week. Oil futures, meanwhile, traded in a narrow range as investors tried to determine whether recent price declines were temporary.
At the pump, gas prices rose to a record national average of $3.962 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Gas prices keep rising despite a downturn in the oil market over the last week, and will likely soon pass the $4 mark.
“I do think we could get to $4,” said Geoff Sundstrom, a spokesman for AAA. “We could get there right in time for June 1.”
Gas prices are already higher than that in many parts of the country, and average more than $4 in 12 states and the District of Columbia.
Diesel prices are also soaring; the national average price of a gallon of diesel rose half a cent overnight to a record national average of $4.792 a gallon. Diesel prices are above $5 in some parts of the country. Because diesel is used to transport the vast majority of the goods, prices of food and consumer goods are also rising.
High prices are cutting demand for gasoline; data from the Energy Department and Federal Highway Administration and several surveys in recent days suggest American consumers are driving less. Jitters about falling demand have helped send oil prices sharply lower since they set a new record over $135 a barrel last week.
Overnight, light, sweet crude for July delivery fell below $125 a barrel before rebounding to settle up 73 cents at $127.35 on the New York Mercantile Exchange. On Thursday, prices fell $4.41, the biggest single-day price drop since March 19.
Friday’s price uncertainty reflected an ongoing battle in the oil market between investors who feel prices have risen too far, and those who think global demand and tight supplies justify prices in the $130s — or higher.
“A $4 drop just really looks like a buying opportunity to some people,” said Brad Samples, an analyst at Summit Energy Services Inc. in Louisville, Ky.
Andy Lebow, senior vice president at MF Global LLC in New York, said investors are uncertain whether the past week’s nearly $10 price decline is a correction in a bull market, or a sign that the bull market has run its course.
Additional selling pressure came from a Commodity Futures Trading Commission investigation into possible price manipulation in oil futures markets. The CFTC also announced new rules designed to increase transparency of U.S. and international energy futures markets.
But the dollar, which fell against the euro and British pound, gave investors reason to buy. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. Also, a lower dollar makes oil less expensive to investors overseas.
If oil prices fall, gas prices will eventually follow, analysts say. At the moment, there may be too much momentum left over from oil’s sharp rise in recent weeks to stop gas prices from hitting $4. On the Nymex, gasoline futures for June delivery rose to a trading record of $3.52 on Thursday; on Friday, the contract rose 0.47 cent to settle at $3.4089 a gallon. The June gasoline contract expired at the end of trading Friday; trading in expiring contracts is often volatile.
“I think (gasoline prices are) set up for a strong possibility … of a strong move above $4,” Samples said.
“Whether that becomes a price ceiling (followed by price declines) we’ll just have to wait and see,” Sundstrom said.
In other Nymex trading, June heating oil futures, which also expired Friday, fell 2.87 cents to settle at $3.6598 a gallon, and July natural gas futures rose 22.9 cents to settle at $11.703 per 1,000 cubic feet.
In London, July Brent crude rose 89 cents to settle at $127.78 a barrel on the ICE Futures Exchange.
Hurricanes vs. energy prices - May 30: CNBC’s Scott Cohn talks with MSNBC’s Contessa Brewer about the steps oil companies are taking to prepare for the hurricane season along the energy-rich Gulf coast.
You can return to the main Market News page, or press the Back button on your browser.
