Oil price above $30 a barrel, may hold there
Posted 6/3/2003 12:21 AM Updated 6/3/2003 3:05 PM By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Oil prices topped $30 a barrel for the first time in six weeks as supply concerns and brighter demand prospects put a textbook squeeze on prices.
Prices for crude oil trading in New York remained above $30 in Tuesday trading after jumping 4% Monday to close at $30.71. That was the highest level since April 21, and up 20% from a month ago. The price was far off the $37.83 peak hit March 12, a week before the war in Iraq began. (Related: Oil remains above $30 in Tuesday trading)
Analysts do not expect prices will climb to those March levels anytime soon, as countries and oil companies seek to cash in on the higher prices and will increase or maintain supply. That will effectively put a ceiling on price gains, they say.
"You can bet oil producers will either not cut (output) to the degree they were going to or agree to start producing more," Hess Energy and Trading executive adviser Ed Morse says.
That's good news for consumers, as the summer driving season gets underway. The average price of a gallon of regular was $1.47 Monday, the lowest since the end of January, the government said.
In April, the Energy Department predicted the price of a regular gallon of gas would average $1.56 this summer, up from a year ago but about even with 2000 and 2001. That prediction hasn't changed, says Doug MacIntyre, oil analyst at the agency.
Reasons for the oil price gain:
•Inventories. U.S. inventories of crude oil are running 13% below the five-year average. Supplies have been lowered due in part to increased demand for heating oil because of an unusually cold winter and a general strike in key exporter Venezuela.
•OPEC. Members of the oil cartel meet June 11, and some members have expressed interest in an output cut.
•Iraq. Uncertainty about when Iraqi oil exports will resume and how much will be pumped is helping boost prices.
•Economy. Expectations for a resurgence in economic activity have some expecting energy demand will rise.
Contributing: James Cox