Oil touches $103 a barrel!
Crude futures retreat from the new record as the dollar strengthens and Turkish forces pull out of northern Iraq.
NEW YORK (AP) -- Oil futures retreated from a new overnight record above $103 as the dollar gained strength and Turkish forces withdrew from northern Iraq.
The slumping dollar and tension in the oil-rich Middle East have been among the factors in crude's dramatic 19% rise from earlier this month.
Still, many analysts believe the declines may be temporary and that oil is poised to rise above $103.76 a barrel. That's the price many believe to be oil's all-time high, on an inflation-adjusted basis, set in early 1980 during the Iranian hostage crisis.
Gasoline and diesel prices, meanwhile, continued to soar.
Gas prices rose 0.3 cent overnight to a national average of $3.164 a gallon, creeping closer to last May's record of $3.227 a gallon, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.
While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of nectarines, computers, clothing and virtually every other consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
Bush finds out about $4 gas forecasts
"It's everything that gets shipped," Kloza said of diesel fuel's impact on the economy. "That is the one that is much scarier."
Gas and diesel prices are following crude oil, which spiked to a new record of $103.05 overnight. In midday trading on the New York Mercantile Exchange, light, sweet crude for April delivery fell 72 cents to $101.87 a barrel.
Analysts cited profit-taking by investors who have bought into oil's recent runup for Friday's declines.
The dollar rose against the euro Friday, reversing one of the factors that has attracted huge flows of investment capital to the oil market. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. That logic tends to reverse itself when the dollar strengthens.
Also giving investors reason to sell was Turkey's decision to withdraw its forces from northern Iraq, which they invaded earlier this week in search of Kurdish rebels. Turkish attacks on Kurds in northern Iraq -- and the concern that Kurds would retaliate by cutting off oil supplies -- have helped propel oil to new records in recent months.
Traders also continue to fret over OPEC, which meets next week to consider production levels. The prospect that the Organization of Petroleum Exporting Countries might cut production levels has helped fuel oil's recent rise. But with prices holding above $100, most analysts now expect OPEC to hold production steady.
Despite oil's modest retreat Friday, many analysts believe the investment flows that have pushed prices higher this year are not about to dry up.
"We've just got a huge, huge speculative drive going on here," said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill. "The fresh buying brings in new buying."
Many analysts believe the underlying fundamentals of oil supply and demand do not justify such high prices. Some predict speculative investing could push oil prices as high as $120, while others argue prices have formed a bubble, and could crash back to the $70 range.
Other energy futures also fell Friday. In other Nymex trading, March heating oil fell 1.54 cent to $2.8302 a gallon while March gasoline futures fell 0.15 cent to $2.4942 a gallon. April natural gas futures fell 6.5 cents to $9.378 per 1,000 cubic feet.
AI
