Oil futures prices reach record high
NEW YORK -- Oil futures prices rose sharply Wednesday, briefly climbing above a record $80 a barrel after the government reported a surprisingly large drop in crude inventories and declines in gasoline supplies and refinery activity.
The report from the Energy Department's Energy Information Administration suggested oil supplies are tightening as demand remains strong. That is why oil prices are rising despite OPEC's decision Tuesday to boost crude production by 500,000 barrels per day this fall, analysts said.
Despite Wednesday's jump, oil is still well 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.
Oil's recent advance has been largely due to speculative buying by big investment funds responding to a price structure in which oil contracts for delivery in future months are cheaper than the current front-month contract, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena.
That kind of structure signifies tight demand in the immediate future, and is a buying incentive. Investors who buy now will end up with more oil contracts later, when October futures roll over to cheaper contracts for delivery in later months, Ritterbusch said.
"This is a market that wants to run up on the slightest bit of information," Ritterbusch said.
Prices were also being supported by worries a tropical depression that formed in the western Atlantic on Wednesday will become a hurricane and hit critical Gulf of Mexico oil and gas infrastructure.
"The National Hurricane Center says there's a good chance that could get into the Gulf," Ritterbusch said.
Light, sweet crude for October delivery rose $1.68 to settle at a record $79.91 on the New York Mercantile Exchange after rising as high as $80.18 earlier.
At the pump, meanwhile, the average national price of a gallon of gas inched higher by 0.1 cent overnight to $2.815, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May.