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Gas, diesel prices hit new records Analysts reluctant to define a single day’s decline as the end of crude’s bull run; many see continued investment in futures John Wilen Associated Press Writer
U.S. retail gas prices extended their record run Thursday, April 10, adding to the pain consumers feel every time they fill up. Experts predict prices will rise even higher as peak summer driving season approaches.
Meanwhile, crude oil futures fell as the dollar strengthened, giving investors an opportunity to collect profits from the previous session’s record run above $112.
At the pump, the national average price of a gallon of gas rose 1.4 cents overnight to a record $3.357 a gallon, according to AAA and the Oil Price Information Service. Prices have set a string of records in recent weeks, and are 56 cents higher than a year ago.
Retail diesel, the fuel of trucks, trains and ships, rose overnight to a new national record of $4.045 a gallon.
DOE expects gasoline to average $3.60 The U.S. Department of Energy expects gasoline prices to average as much as $3.60 a gallon this summer, but believes the national average price could spike as high as $4 a gallon at times.
“Gas hitting $3.60, $3.65 a gallon seems like a done deal,” said James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com.
Gasoline prices are rising, in part, because of a supply crunch that occurs every spring when refiners switch over from making winter grade gasoline to the less polluting fuel they’re required to sell during the summer. Summer grade gasoline is more expensive to make. Also, refiners try to sell off all of their winter grade fuel before the switchover, which drops supplies to very low levels.
Two factors exacerbate spike This year, the spring price spike is being exacerbated by two unusual factors: tight supplies of key gasoline blending components and record oil prices. Analysts say alkylate, an ingredient critical to the manufacture of summer grade gasoline, is in short supply and will push prices higher.
Meanwhile, crude oil, the main ingredient in gasoline, dipped April 10, but remains close to record levels.
Light, sweet crude for May delivery fell $1.67 to $109.20 a barrel on the New York Mercantile Exchange as the dollar strengthened against the euro, giving some investors an opportunity to take profits. Crude prices rose to a new trading record of $112.21 on April 9 after DOE said supplies unexpectedly fell the previous week.
Many analysts place most of the blame for oil’s run above $100 in recent months on the steadily falling dollar. But the effect reverses when the greenback rises, making commodities such as oil a less effective hedge against inflation. Also, oil is more expensive to investors overseas when the dollar strengthens.
However, analysts are reluctant to define a single day’s decline as the end of crude’s bull run. Many believe investors will continue plowing money into crude futures on expectations that Federal Reserve rate cuts — perhaps two more this year — could weaken the dollar further.
“We could now see a lot of ‘system money’ join the upside breakout, propelling prices even higher,” said Edward Meir, an analyst at MF Global UK Ltd., in a research note, referring to hedge fund investors.
May gasoline futures fall In other April 10 Nymex trading, May gasoline futures fell 2.74 cent to $2.7468 a gallon, while May heating oil futures fell 1.95 cents to $3.215 a gallon. Heating oil futures are trading near record levels due to falling supplies and strong demand overseas.
Nymex natural gas for May delivery rose 7.6 cents to $10.132 per 1,000 cubic feet. DOE said natural gas supplies fell by 14 billion cubic feet the previous week, in line with analyst expectations.
In London, May Brent crude fell $1.19 to $107.28 on the ICE Futures Exchange.
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