Oil traders watch Gulf of Mexico as economic data sends crude prices toward 18-month high

By Mark Williams, AP
Monday, May 3, 2010

Economic data _ not spill _ push oil prices higher

Oil and retail gasoline prices edged higher Monday, as traders watched whether the massive crude spill in the Gulf of Mexico will curtail imports if the oil slick shuts down a key shipping lane.

Analysts said Monday oil prices are not being driven by the spill for now.

Instead they credit economic news — improving manufacturing, construction and consumer spending figures — along with a stronger stock market for driving prices higher. Oil

“It just lends more credence that the economy is on the rebound,” oil analyst and trader Stephen Schork said.

To this point, supplies have not been interrupted. Ships have been able to go around the slick to make it to the Southwest Pass. The pass is a vital area where oil and other products make their way to the Mississippi River on the way to New Orleans.

The concern is that the slick eventually could disrupt traffic by shutting down water lanes or because ships will need to be cleaned at sea before docking.

And that uncertainty figures to support oil prices that at one point Monday reached their highest levels since October 2008 even though there is plenty of oil in storage if disruptions occur, analysts said.

The spill also comes at the peak time for the traditional winter-to-spring rally in oil and wholesale gas prices.

Retail gasoline prices jumped 1.2 cents overnight to a national average of $2.895 per gallon. Many analysts predict gasoline will top $3 per gallon later this spring before falling.

Prices have risen 7.5 cents in the past month and are 82.7 cents higher than year-ago levels.

In its weekly report on gasoline prices released late Monday, the Energy Information Administration said the national average for a gallon of gasoline rose 1.1 cents to $2.86. average of gasoline was $2.86, an increase of 1.1 cents from the week before.

Many analysts have said the rally in oil prices from $69 a barrel in February is unwarranted given the ample supplies of crude coupled with continued low demand.

“Runaway rallies have a tradition of seizing upon any events to justify the last explosive phase of the rally,” said Tom Kloza of the Oil Price Information Service.

Benchmark crude for June delivery climbed 4 cents to $86.19 a barrel on the New York Mercantile Exchange. The contract had been as high as $87.15, topping the previous 18-month high of $87.09 reached on April 6. The contract rose 98 cents to settle at $86.15 on Friday.

In other Nymex trading in June contracts, heating oil rose 2.94 cents to settle at $2.3451 a gallon, and gasoline added 3.57 cents at $2.4351 a gallon. Natural gas gained 8 cents at $4 per 1,000 cubic feet.

In London, June Brent crude rose $1.50 to $88.94 on the ICE futures exchange.

Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

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