Oil rebounds on Nigeria threat
Crude rises $2.18; gas at new record
NEW YORK - Oil futures rose back above $131 yesterday, recouping early losses as threats against Nigerian oil facilities led investors to at least temporarily set aside concerns about falling US gas demand.
Light, sweet crude for July delivery rose $2.18 to settle at $131.03 on the New York Mercantile Exchange, after spending the morning swinging between gains and losses. At its low, oil was down nearly $3 a barrel, compounding a $3.34 drop in crude on Tuesday. It passed $135 for the first time last Thursday.
Although prices rebounded sharply yesterday, investors are still contending with a growing belief that US demand for gas is falling in response to prices that already average more than $4 in 11 states and the District of Columbia. The national average price of a gallon of regular gas rose 0.7 cent overnight to a record of $3.944, according to AAA and the Oil Price Information Service.
Gas prices are likely to keep rising as long as crude prices don't collapse, analysts said. And that means prices will soon breach the psychologically important $4 level on a national basis.
"I can't see anything to stop it from going there," said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
Crude prices received a fresh boost from word that a Nigerian rebel group threatened attacks on oil installations beginning today to mark the one-year anniversary of President Umaru Yar'Adua's inauguration. A weekend attack by the group on an oil facility cut about 130,000 barrels of the nation's oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note. News of disruptions in Nigeria, a major US supplier, have helped push oil prices higher over the past year.
Oil investors also received mixed signals from the dollar, which rose against the euro, but fell against the yen and pound. When the dollar declines, investors tend to buy commodities as a hedge against inflation. But a stronger dollar makes oil more expensive to investors dealing in other currencies.
