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Crude oil prices rose to within a penny of $114 a barrel Tuesday, setting a new record as concerns mounted about global supplies. U.S. retail gasoline and diesel prices also struck new highs.Traders honed in on a report by the International Energy Agency that said Russian oil production dropped this year for the first time in a decade. The report raised concerns about whether the key oil-producing nation will have enough supply to help feed growing global demand.
"In an emotionally driven market like we've got now, it just doesn't take much in the way of a headline to prompt a psychological response," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.
Light, sweet crude for May delivery rose as high as $113.99 a barrel on the New York Mercantile Exchange before backing off to $113.75, up $1.99 from Monday's record settlement price of $111.76 a barrel.
Meanwhile, retail gasoline prices rose to a new average national record of $3.386, according to AAA and the Oil Price Information Service. Prices were highest in California, where mid-range and higher grades are now averaging more than $4 a gallon.
Diesel prices at the pump jumped to $4.119, also a record, setting the stage for higher prices on food and other goods transported by truck, ship and rail.
Prices are widely expected to keep rising as summer approaches. Gasoline futures jumped by more than 4 cents to $2.8635, nearing a record for the benchmark contract that was set as Hurricane Katrina made landfall in 2005.
"Unfortunately, we do expect the price of gasoline and probably diesel as well are going to escalate as long as the price of oil keeps moving higher," said Geoff Sundstrom, a fuel price analyst for AAA.
Oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold. The greenback strengthened marginally against the euro Tuesday afternoon.
The report from the IEA — the Paris-based energy watchdog for industrialized countries — said Russia, the world's biggest oil exporter after Saudi Arabia (web|news), averaged 10 million barrels per day from January through March, down 1 percent from 2007 and the first time production has failed to exceed previous-year figures since 1998.
Artyom Konchin, an analyst with Russian investment bank Aton Capital, attributed Russia's oil supply lull to high taxes and insufficient reinvestment into infrastructure.
"It's not that we don't have enough oil," he said. "We just don't have enough capital going into developing the fields."
Crude prices were also supported by reports of a number of supply disruptions.
Attracting the most attention was the closure of Mexico's three main oil-exporting ports on the Gulf Coast because of bad weather starting Sunday. Only one of the ports remained closed Tuesday, according to Mexico's Communications and Transportation Department.
Sundstrom said the closures were significant because they are a major source of U.S. crude.
"Certainly, it's not helpful," he said. "It just shows you how fragile the oil markets are."
Mexico's Merchant Marine issued a bulletin Tuesday morning that the Pacific oil port of Salina Cruz also had been closed because of strong wind and high waves, although that terminal is not a major supplier for the U.S.
In other Nymex trading, heating oil futures surged by over 7 cents to sell for $3.2739 gallon, while natural gas futures spiked by 15.9 cents to $10.212 per 1,000 cubic feet.
In London, May Brent crude rose $1.70 to $111.54 on the ICE Futures exchange.
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Associated Press Writers George Jahn in Vienna, Austria, Gillian Wong in Singapore, and Jessica Berstein-Wax in Mexico City contributed to this report.
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