Oil lingers near $87
NEW YORK -- Oil and gasoline prices barely budged Tuesday, as traders took a break from a recent rally driven by signs of an improving economy.
Benchmark crude for May delivery rose 20 cents to $86.82 a barrel in midday trading on the New York Mercantile Exchange. Earlier prices touched a new 18-month high of $87.09 a barrel. Oil prices have climbed 24 percent since February.
Crude traded between $69 and $84 for about nine months before breaking above that range last week. On Monday, reports showed improvements in services businesses and in the housing market.
Oil analyst Stephen Schork said Friday's encouraging jobs data helped fuel crude's rally, since an uptick in manufacturing jobs should help boost domestic energy demand "from coal to fuel furnaces to the diesel to fuel freight transport." The Labor Department said employers added 162,000 jobs in March, the largest job gain in three years.
Still, American consumers are looking at a 9.7 percent unemployment rate and gasoline prices that have reached a high for the year.
The average U.S. retail price for gas hit $2.83 per gallon Tuesday, according to AAA, Wright Express and Oil Price Information Service. The price 79.1 cents a gallon higher than a year ago.
Many oil analysts expect pump prices to rise to $3 per gallon (79 cents a liter), a price point that could trigger consumer cutbacks in fuel and other spending.
"Increasing gasoline prices at the pump...(has) a tendency to strangle growth," Schork warned.
Schork thinks the U.S. economic recovery remains fragile and the already high unemployment rate could rise as discouraged workers hunt for jobs that haven't yet materialized.
A stronger dollar and weaker equities tempered oil prices in Tuesday trading. A stronger dollar makes dollar-denominated crude more expensive for holders of other currencies.
In other Nymex trading in May contracts, heating oil fell a fraction of a penny to $2.2675 a gallon, and gasoline dropped 0.12 cent to $2.3490 a gallon. Natural gas fell 4.3 cents to $4.234 per 1,000 cubic feet.
In London, Brent crude was up 24 cents at $86.12 on the ICE futures exchange.