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WORLD> America
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Oil's biggest day drags down US stocks
(Agencies)
Updated: 2008-06-07 09:10 Light, sweet crude for July delivery officially finished the day at $138.54, up $10.75 on the Nymex. But after the settlement, the contract jumped as high as $139.12. Prices hit a previous record of $135.09 a barrel on May 22, and settled Thursday at $127.79. Traders also zeroed in on remarks by an Israeli Cabinet minister who was quoted as saying his country will attack Iran if it doesn't abandon its nuclear program. Transportation Minister Shaul Mofaz added that Iranian President Mahmoud Ahmadinejad "will disappear before Israel does," the Yediot Ahronot daily reported. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries, and traders worry that any conflict with Israel could disrupt global supplies. A further weakening of the dollar also helped send oil prices higher by enticing overseas buyers armed with stronger currencies and others looking for a hedge against the greenback. But it also represented a stampede by bullish traders and optimistic computer models betting that prices still have further to rise. "The bulls ... refuse to go away," said Stephen Schork, an analyst and trader in Villanova, Pa. Meanwhile, US gas prices at the pump continued to hover just shy of an average $4 a gallon, easing only 0.3 cent from Thursday's record. US drivers are now paying an average of $3.99 for a gallon of regular gas nationwide, according to AAA and the Oil Price Information Service; in many parts of the United States, consumers are already paying well over $4. Retail diesel slipped a penny overnight to $4.76. Pump prices are bound to rise even further if oil sustains its advance. James Cordier, president of Tampa, Fla.-based trading firm Liberty Trading Group, predicted prices could rise to $4.25 as early as the end of the month. "Unfortunately, drivers cutting back isn't going to lower the price of gasoline anytime soon," he said. The dramatic reversal in what had been a weakening oil market began Thursday after ECB President Jean-Claude Trichet suggested the bank could raise interest rates and the euro climbed against the dollar. When interest rates rise in Europe, or fall in the US, the dollar tends to weaken against the euro. Many traders buy commodities such as oil as a hedge against inflation when the dollar is falling, and a weaker dollar makes oil cheaper for investors dealing in other currencies. Analysts believe the dollar's protracted decline has been a major reason why oil prices have nearly doubled in the past year. The euro strengthened further against the greenback Friday. A Labor Department report showing the US unemployment rate jumped half a percentage point to 5.5 percent last month -- its biggest monthly increase since 1986 -- could drag the dollar even lower in the days ahead. "Unemployment jumping as it did today will be in the market for a long time and will continue to pressure the US dollar," Cordier said. The influx of so much fresh money into the energy markets has caught the attention of federal watchdogs. The US Commodity Futures Trading Commission recently said it was six months into a probe of US oil markets focused on possible price manipulation. Asked about Friday's surge, CFTC spokesman R. David Gary said: "People are aware of what's happening and are monitoring the markets closely, but beyond that there is no comment." In other Nymex trading, heating oil futures jumped 29.32 cents to settle at $3.974 a gallon, while gasoline prices rose 21.35 cents to settle at $3.548 a gallon. Natural gas futures rose 17.4 cents to settle at $12.693 per 1,000 cubic feet. In London, July Brent crude shot up $10.15 to settle at $137.69 a barrel on the ICE Futures exchange. |
