Oil Prices Hit New High for 2009

HOUSTON (AP) — Oil prices surged again Wednesday to a new high for the year with investors pouring money into crude markets as a hedge against inflation.

Adding to crude’s advance was new government data that showed an uptick in U.S. demand for gasoline, and a report from oil giant BP PLC that said the world’s proved oil reserves fell in 2008, the first drop in a decade.

Benchmark crude for July delivery rose $1.26 to $71.27 a barrel in trading on the New York Mercantile Exchange after earlier touching $71.79. On Tuesday, it jumped $1.92 to close at $70.01.

As U.S. currency has lost value over the past several months, crude prices have doubled largely from the influx of cash from Wall Street. Investors have used oil and other commodities as a hedge against a weak dollar.

Equity markets have rebounded as well on the belief that the worst of the recession is over, and that has helped pull energy prices higher, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

“That kind of economic optimism easily feeds into expectations that oil demand will be coming back sooner than expected,“ Ritterbusch said.

Supporting that view, crude and gasoline held in U.S. storage facilities tumbled last week as Americans took to the road for the summer driving season, the government said Wednesday.

But the country is still flush with gasoline and oil, and it’s the weak dollar that has driven crude prices higher for weeks.

Soaring oil prices helped push the U.S. trade deficit higher for a second straight month in April, the Commerce Department reported Wednesday.

Already, there are concerns that inflated energy prices, while far below last year, could slow an economic recovery.

The Energy Department’s Energy Information Administration said Tuesday that crude prices will likely average $67 a barrel in the second half of 2009, about $16 higher than the first six months of the year. A month ago, the EIA’s price-per-barrel forecast for the second half of 2009 was $55.

The EIA also predicted consumers will be paying $2.70 for a gallon of gasoline by July before prices level off.

Gasoline prices have spiked in the past several weeks, in part because of seasonal factors, but pump prices are still a bargain compared with last summer.

The average national retail price for regular unleaded rose less than a penny overnight to $2.62 a gallon, according to auto club AAA, Wright Express and the Oil Price Information Service. That’s up 40 cents in the past month but well below the $4.04 motorists were paying this time last year.

In other Nymex trading, gasoline rose by 3.53 cents to $2 a gallon while heating oil fetched $1.833 a gallon — up 2.5 cents. Natural gas for July delivery fell 1 cent to $3.721 per 1,000 cubic feet.

In London, Brent prices rose in tandem with Nymex crude, gaining $1.06 cents to $70.68 a barrel on the ICE Futures exchange. Trader and analyst Stephen Schork noted that “for the thirteenth time in the last 15 sessions, London crude for July delivery posted a new year-to-date high.“