Oil Prices Slide, Retail Gas Hits Record
By ADAM SCHRECK – 13 hours ago
NEW YORK (AP) — Gas prices at the pump surged to a new record over the weekend, while crude oil accelerated its slide Monday amid a broad-based commodities sell-off.
The average price for a gallon of regular unleaded rose to $3.287, according to AAA and the Oil Price Information Service. That's two-tenths of a penny higher than a record set earlier in March. Prices were highest in Hawaii and California, where the average price topped $3.60 a gallon.
Drivers hoping for relief are likely to be disappointed. Gasoline prices are expected to keep rising as the summer driving season brings with it greater demand for the fuel and refineries shift over to more expensive summer-grade fuel.
"We need to see the price of oil come down well below $100 for a sustained period of time before we'll see these gasoline prices move lower," said AAA fuel price analyst Geoff Sundstrom.
Last year, prices peaked in May before backtracking; with gasoline already at a record it will like only continue its advance. The price of crude oil, the main ingredient in gasoline, is also much higher than it was when gas prices spiked a year ago.
"There's been a massive increase in the primary cost component in gasoline. That's simply going to be passed on to the consumer," Sundstrom said.
On Monday, light, sweet crude for May delivery dropped $4.04 to settle at $101.58 a barrel on the New York Mercantile Exchange, adding to a decline of nearly $2 a barrel on Friday. Even so, prices finished the first three months of the year 5.8 percent higher than where they started; crude set a record of $111.80 in March before giving up ground.
Monday's drop came as traders sold off a wide range of commodities, from precious metals and gasoline to pork bellies and soybeans at the end of the first quarter. The price of gold, for instance, sank $14.40 to settle at $916.20 on the Nymex.
Speculators have poured money into commodities in recent weeks as a hedge against inflation and a weakening dollar, which neared its all-time low against the euro Monday.
But traders unwound some of those trades as the quarter came to a close and contracts for heating oil expired. Market observers said investors may have sold to settle future positions and lock in profits, or were simply holding back their bets in the absence of headlines that would entice fresh buying.
"We've seen some ... air come out of the bubble," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "We may see some confidence return to the dollar, and all this money that embraced commodities as a hedge could go away."
Not all commodities fell, however. Natural gas was one of the few to buck the downward trend, jumping 30.1 cents to settle at $10.101 per 1,000 cubic feet on the Nymex.
Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., attributed the gain to cold weather earlier in the year. Supplies of the heating, cooking and power-generation fuel typically increase at this time of year as warmer springtime temperatures slow demand.
"That process is going to be delayed this year due to the cold weather," he said. "We've virtually erased a huge supply surplus that existed at the beginning of winter."
Analysts are split on oil's direction. Many think prices will rise to new records in coming months as the dollar weakens further, but others say such high prices can't be sustained.
"We have huge speculative positions in oil," said Flynn, who believes prices are likely to move lower. "Some may call it a bubble, some may just call it overbought."
The dollar sank as low as $1.5895 against the 15-nation euro — just shy of its March 17 record of $1.5904 — before strengthening to $1.5871 later in the day.
Crude prices were also responding to reports of relative calm in Iraq, where two attacks on oil pipelines in Basra last week had raised concerns about a plunge in that country's exports. An official with the country's South Oil Co. said Saturday that operations were back to normal.
Meanwhile, Shiite cleric Muqtada al-Sadr has ordered his fighters to stand down, and a top Shiite cleric in Lebanon who was born in Iraq and holds some sway with that country's Shiites issued a religious edict prohibiting attacks on Iraq's oil industry and other public infrastructure.
"The risk of another (pipeline) explosion is a little bit less, at least in the view of the market," Flynn said.
In other Nymex trading, heating oil futures fell 5.58 cents to settle at $3.0492 a gallon, while gasoline futures sank 10.07 cents to settle at $2.6163 a gallon. Brent crude futures fell $3.47 to settle at $100.30 a barrel on the ICE Futures exchange in London. http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD8VOM4702