Crude Settles At 2-1/2 Year High Led By Gasoline

   By David Bird
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Crude oil futures prices settled at fresh two-a-half-year high Friday spurred by surging gasoline prices which rose for a seventh day.

The May-delivery gasoline contract on the New York Mercantile Exchange expired at the highest level since mid-July 2008, a level that, if sustained, suggests retail prices are on target to top record highs above $4.11 a gallon.

Traders said the potential for further price gains depends on how refiners lift crude processing rates to meet demand, or whether the weight of high fuel prices cuts into consumption. When U.S. gasoline prices last topped $4 a gallon on a monthly basis, in July 2008, demand fell 5% year on year, government data show.

Persistent strength in gasoline prices, sparked by tightening inventories, pushed crude futures to the highest level since Sept. 22, 2008. Nymex light, sweet crude oil for June delivery rose $1.07 a barrel, to $113.93 a barrel. ICE June Brent crude settled up $1.93 a barrel, or 1.5%, at $125.89 a barrel, a three-week high.

Traders said continued weakness in the dollar, after Federal Reserve officials this week signaled little concern about the potential for rising inflation, helped underpin crude.

"The bulls are squarely in charge and continue to push the market higher," said Gene McGillian, a broker and analyst at Tradition Energy.

The chief economist of the International Energy Agency warned that rising oil prices are threatening a still-fragile economic recovery. But Fatih Birol, in an interview with Dow Jones Newswires, said prices could march higher as global refiners, emerging from seasonal maintenance shutdowns, lift crude oil use by 3 million barrels a day over the next few months to meet seasonal demand.

Birol called on the Organization of Petroleum Exporting Countries to raise production at its planned June 8 meeting, warning that "we may see higher prices than we see now" otherwise.

In the U.S., the world's largest oil consumer, high prices appear to be having an impact on demand. Latest four-week data for April 22 show gasoline demand down 1.6% from a year ago, according to the Energy Information Administration, which also reported February demand fell by a steep 3.9% from earlier estimates and was unchanged from a year ago.

AAA Daily Fuel Gauge Report said the nationwide average price of regular gasoline was $3.909 a gallon Friday, up 6.1 cents from a week ago.

On Nymex, reformulated gasoline blendstock futures for May delivery expired at $3.4648 a gallon, up 3.5 cents on the day. That is the highest level since July 14, 2008. Prices jumped 23.17 cents, or 7.2%, over the past seven days, as gasoline stocks have continued to drop sharply from 20-year highs in mid-February on lower refinery output.

Given the long-term 65-cents-a-gallon differential, retail prices would be heading above record levels of $4.11 a gallon if Friday's futures price is sustained. But the incoming front-month June contract traded at a discount of 6.5 cents to the May, meaning further sharp gains will be need to maintain price momentum.

May heating oil expired at $3.2558 a gallon, up 2.42 cents, and the highest since April 8.

More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:

Nymex Light Crude Oil Close

Nymex Harbor RBOB Gasoline Close

Nymex Heating Oil Close

ICE Brent Crude Oil Close

ICE Gas Oil Close

(Source: http://online.wsj.com/article/BT-CO-20110429-711388.html)