Oil prices touched a new record above $73 a barrel
Friday amid concern about Iran's nuclear ambitions and declining U.S. gasoline
stocks.
Light, sweet crude for June delivery, which became the front-month contract
Friday, opened in electronic trading at a high of $73.50 a barrel — setting a
new intraday record for a front-month contract on the New York Mercantile
Exchange.
It later eased to $72.98 a barrel, down 71 cents from the contract's close
Thursday, amid some profit-taking.
On Thursday, Royal Dutch Shell PLC's announcement that its Mars platform will
resume normal production by late June offered some relief to the markets
Thursday. It is the largest oil platform in the Gulf of Mexico damaged by
Hurricane Katrina, and accounts for about 5 percent of total Gulf of Mexico oil
and natural gas production.
It's "safe, domestic, in-our-own-backyard production we can count on," said
John Kilduff, an analyst at Fimat USA. But he said traders will be watching next
week's inventory reports closely.
The June contract has been trading at these levels previously, touching a
high of $74.50 a barrel on Thursday.
"The pullback appears to be due to profit-taking, which is not surprising
considering prices have really surged in the past few days," said Victor Shum,
energy analyst with Purvin & Gertz in Singapore. "The decline will not be
large because the Iranian issue is keeping a high floor under prices."
The May contract, which expired Thursday, fell 22 cents to settle at $71.95 a
barrel. It had traded as high as $72.49 the day before.
"I'm inclined to think it's not reached a peak yet," said Tobin Gorey,
commodity strategist at the Commonwealth Bank of Australia in Sydney. "We're
still faced with a tight supply-demand equation against the backdrop of strong
economic growth, and there's still more money to come into the market."
"And traders are not relenting on their worries of Iran," Gorey said.
On Thursday, Hugo Chavez, president of Venezuela, one of the world's top oil
producers, said oil prices would reach $100 a barrel should concern over Iran's
nuclear weapons capability lead the United States to invade that Middle Eastern
nation.
The United States and Britain say that if Iran does not comply with the
Security Council's April 28 deadline to stop uranium enrichment, they will seek
a resolution that would make the demand compulsory. Iran has consistently
resisted calls to abandon its enrichment program.
Also, in Nigeria, the fifth-biggest source of U.S. oil imports, militants
late Wednesday exploded a car bomb inside a military base, in their first major
attack since February. This year, the group has been cutting more than 20
percent of Nigeria's daily oil exports of 2.5 million barrels.
Meanwhile, traders also fretted about the possibility of inadequate gasoline
supply in the summer, after weekly U.S. government data showed a drop in
domestic gasoline stocks.
U.S. pump prices continue to rise. The average price for a gallon of unleaded
regular gasoline rose to $2.825 a gallon, up more than 2 cents from Wednesday
and more than 60 cents from a year ago, according to AAA's daily fuel gauge
report.
Gasoline inventories typically decrease this time of the year as refiners
shut plants to perform maintenance ahead of the summer driving season. But there
is additional worry about supplies this summer because of possible tight
supplies of ethanol, which is increasingly needed as a clean-burning additive as
refiners phase out use of methyl tertiary butyl ether, or MTBE.
On Friday, gasoline futures fell 2.28 cents to $2.1920 a gallon, while
heating oil prices lost 2.10 cents to $2.0326 a gallon. Natural gas slipped 12.4
cents to $7.940 per 1,000 cubic feet.