Oil soars to record of $89.47
Analysts attributed the gain to the sliding dollar, which lured buyers to dollar-denominated energy futures.
NEW YORK - Oil prices surged yesterday, touching $90 a barrel, as the falling dollar drew new foreign investors and speculators to dollar-denominated energy futures.
"The main driving factor today is . . . the dollar making an all-time low against the euro," said James Cordier, president of Liberty Trading Group, of Tampa, Fla.
While oil prices have risen sharply in dollar terms in recent days, the steadily weakening dollar means oil futures are seen as a bargain overseas. Data released in recent weeks show speculative buying of oil futures is on the rise. Buying by foreign investors sends prices up, which draws more speculators into the market.
"It becomes a self-fulfilling prophecy," said Brad Samples, commodities analyst at Summit Energy Services Inc., of Louisville, Ky.
Many analysts feel that the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel. On Wednesday, the Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies were tight.
Yesterday, light, sweet crude for November delivery rose $2.07 to settle at a record $89.47 a barrel on the New York Mercantile Exchange. Prices continued rising after the Nymex close, hitting $90.02 in electronic trading before returning to about $89.60.
Despite the gains, the price of oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
November gasoline rose 3.85 cents to settle at $2.1851 a gallon, while Nymex heating-oil futures rose 3.04 cents to settle at $2.3493 a gallon.
November natural gas futures fell 8.4 cents to settle at $7.374 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historic standards.
In London, December Brent crude rose $1.47 to settle at $84.60 a barrel on the ICE Futures exchange.
At the pump, gas prices are finally beginning to follow oil futures higher. The national average price of a gallon of gas rose 1.9 cents overnight to $2.795, according to AAA and the Oil Price Information Service. Many analysts say they think prices will move even higher in coming days if oil prices do not retreat.
Some analysts say they think oil prices are nearing a seasonal peak and will soon begin to fall.
And if prices start to fall, they could fall quickly as speculators sell to lock in profits.
"We don't think industry fundamentals support oil prices near $60 [a barrel], let alone $90, but with excessive speculation and lack of government scrutiny, prices could go even higher, before they crash, eventually, in our view," said Fadel Gheit, an analyst at Oppenheimer & Co. Inc., in a research note.