Oil prices briefly climbed to record territory above $58 a barrel Monday as concerns about growing demand and potential supply disruptions once again overshadowed improving crude inventories.
“I’ve been doing this for 22 years and I’ve never seen anything like this,” said oil analyst Ken Miller at Purvin & Gertz in Houston. “I view this as a very unstable situation.”
Late in the day, traders took profits and considered a possible production increase by the Organization of Petroleum Exporting Countries, sending light, sweet crude for May delivery down 26 cents to $57.01 a barrel on the New York Mercantile Exchange.
Prices had climbed as high as $58.28, topping the previous intraday record of $57.70 a barrel reached Friday, when futures settled at a record $57.27.
In London, Brent crude futures fell 28 cents to $56.23 a barrel on the International Petroleum Exchange.
With oil prices up nearly $15 a barrel since the year began, U.S. motorists are spending an average of $2.22 per gallon for regular unleaded gasoline and analysts believe pump prices could rise further as the summer driving season approaches.
Gas prices in Columbia rose as much as 12 cents to $2.19 from Sunday to Monday.
“I don’t know one day to the next what gas prices will be,” said Ross Mutrux, owner of the Lakeshore Sinclair service station.
Energy traders have attributed the recent spike to a wide range of concerns: a limited global supply cushion, growing demand in the U.S. and China and the weakness of the dollar against other currencies. They also say increased speculation by hedge funds is magnifying the increase.
While the U.S. supply of crude oil has been growing steadily for more than a month, refiners are expected to draw down those inventories in the weeks ahead as they ramp up gasoline production to meet summer demand, said oil broker Ed Silliere of Energy Merchant Intermarket Futures in New York.
The surge in fuel prices has strained segments of the U.S. economy, such as airlines, independent truckers and low-income families, but rapid economic growth and improved energy efficiency have blunted the broader impact.
Regardless, some long-time energy analysts say the market is too focused on dire what-if scenarios and not accurately reflecting the fundamentals of supply and demand.
OPEC was caught off guard last year by the surge in global oil demand, geopolitical turmoil abounds and tight worldwide refining capacity leaves little wiggle room in the supply chain. However, Miller, the Purvin & Gertz analyst, insisted, “there’s no shortage of crude and no shortage of products,” a reference to gasoline, diesel and other fuels.
OPEC President Sheik Ahmed Fahd al-Ahmed al-Sabah, who is Kuwait’s energy minister, said Monday that consultations started two days ago about a possible half-million-barrel-a-day increase to the cartel’s output quota. But he said ministers believe “we have to wait to see exactly how” prices behave in the next two weeks.
Any production increase would occur in May, al-Sabah said before a Parliamentary session, noting that OPEC already is exceeding its current production ceiling of 27.5 million barrels a day by about a half million barrels a day.
Lorraine Tan, director of research at Standard & Poor’s investment services in Singapore, said the timing of OPEC’s actions is crucial in affecting crude prices.
“If OPEC acts quicker, prices would come off,” she said.
Nymex crude futures are 65 percent higher than a year ago, but well below the inflation-adjusted peak of $90 a barrel set in 1980.
Heating oil prices fell 2.16 cents to $1.6422 a gallon, while unleaded gasoline was down about a penny at $1.7216 a gallon.
Last week the U.S. government said the nation had 214.4 million barrels of gasoline, or 6 percent above year ago levels. The supply of crude oil — after growing for five weeks straight and by more than 17 million barrels — was 314.7 million barrels, or 9 percent above year ago levels.
The government’s next petroleum supply report is scheduled to be released Wednesday.
Kyle Rodgers of the Missourian contributed to this report.