Gasoline, oil prices move higher as drivers hit the road for Memorial Day
NEW YORK (AP) – Road warriors will receive little relief as they head out the door for this year’s Memorial Day weekend as retail prices hover at all-time highs and gasoline futures plow higher on supply fears. Gasoline futures gained 4.68 cents to settle at $2.407 a gallon Friday on the New York Mercantile Exchange. Light, sweet crude for July delivery followed to close at $65.20 a barrel, up $1.02.
The average retail price inched back from its record high of $3.227 on Thursday to $3.225 a gallon, AAA said, compared with $2.862 a gallon a year ago and $2.109 a gallon in 2005.
A spate of new refinery outages this week threatens to boost future and retail prices, with retail nearing the inflation-adjusted peak of $3.29 a gallon reached in March 1981 according to the Energy Department.
“The feeding frenzy” before Memorial Day has begun in the futures market, said Tim Evans, an energy analyst at Citigroup Global Markets, but he expects trader anxiety to ease after the holiday.
“The idea of an ‘official’ summer driving season is really a myth. There is no ribbon-cutting ceremony that opens the interstates,” Evans said. “We get all hot and sweaty over the idea the driving season is here when it’s not really. It’s a little further beyond the horizon than pop culture has us believe.”
Historically, he said, the strongest demand for gasoline doesn’t start until late June, before the July 4 holiday, which should allow inventories to build some more and reduce pressure on futures, and eventually, retail prices.
Tom Kloza, an oil analyst at Oil Price Information Service, points out that prices in the Midwest and Rockies will probably moderate the most, since those regions suffered the worst increases in the last weeks due to their proximity to refinery disruptions.
However, reports of two new refinery outages this week at Valero Energy Corp.’s McKee refinery in Sunray, Texas, and ConocoPhillips’ Alliance oil refinery in Belle Chasse, Louisiana, kept traders concerned and a floor under prices.
Meanwhile, conflict in Nigeria and Iran continue to support crude oil prices.
“The increasing violence in Nigeria is getting everybody very nervous,” said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. “People just don’t want to be short over the weekend. There’s too many variables. It’s a dangerous position to be in.”
Oil unions began a strike Thursday at Nigeria’s state-owned oil company and threatened to target exports in hopes of reversing the sale of government refineries. The state oil company holds the majority stake in joint ventures with international oil companies that account for more than 90 percent of the country’s oil exports.
In southern Bayels, gunmen kidnapped six oil workers, the latest in a run of more than 100 seizures of foreign workers this year in the oil-producing Niger Delta.
Iran has expanded its uranium enrichment program, and the U.S. Navy is holding unannounced exercises off Iran’s coast. Traders and analysts fear any conflict between the two could result in the closure of the Strait of Hormuz, through which tankers ship carry about 17 million barrels of crude oil a day, according to the U.S. Energy Information Administration.
Brent crude for July had initially spiked above $71 on Thursday after the Iran news. But on Friday, it ended down 3 cents at $70.69 on the ICE Futures exchange in London, giving back some of the “substantial geopolitical risk premium” traders have built into the price, Evans said.
In other trading, heating oil futures added a penny to settle at $1.9391 a gallon, while natural gas prices lost 4.1 cents to $7.640 per 1,000 cubic feet.
AP-ES-05-25-07 1555EDT