Energy prices eased Monday as investors appeared to second-guess a 10 percent surge in the value of crude last week on the New York Mercantile Exchange.
Benchmark crude for June delivery fell 13 cents to settle at $58.50 a barrel. On Friday, the contract rose $1.92 to settle at $58.63 a barrel, the highest level this year, and about 80 percent above the $32.40 per barrel reached on Dec. 19.
Retail gas prices, which have risen more that 15 cents a gallon in the last week, continued to move upward overnight.
Optimism over an economic recovery, or at least the belief that things may not get worse, have pushed energy prices higher with some expecting a rebound in demand. Oil prices have followed the stock market, which has soared since hitting bottom in early March with the Standard & Poor's 500 benchmark index up 37.4 percent.
The Dow Jones industrial average and the S&P 500 also were lower Monday with both indexes down more than 1 percent.
Regardless, oil prices continue to rise even though demand has hit its lowest level since the Sept. 11, 2001, terrorist attacks. Crude inventories are at their highest levels since 1990 when Iraq invaded Kuwait.
"In my mind, this is a market that is looking for an excuse to go higher," said Phil Flynn of Alaron Trading Corp.
But with a weaker stock market and analysts expecting another build in inventories when the government releases its weekly report Wednesday, oil is being held in check, he said
"They're buying just to buy into the momentum," said analyst and trader Stephen Schork.
"No one is looking at the fundamentals."
Prices at the pump continued to trek higher Monday, moving up 1.3 cents to a national average of $2.226 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 17.4 cents higher than last week,
Prices are 17.4 cents higher than a month ago, but more than 15 cents of that gain has come in just the last week. For motorists who had grown accustomed to $2 gas, that rise has caught many off guard.
Rising pump prices are the norm for May, however, because refiners are switching over to more expensive blends of gasoline that are required to meet state and federal emissions requirements.
There are also refineries still operating at reduced levels due to annual maintenance, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
One more reason why gas prices are rising: gasoline futures on Nymex have been rising on the same optimism that has boosted crude and equities markets. Reformulated gasoline traded in New York, the major trading center for both imports and domestic fuel, is up about a dime in the last week.
Kloza said gas prices may hit as high as $2.30 a gallon before Memorial Day, but that should be the peak for the time being.
"Demand is flat. Supplies are very abundant, and there is awful lot of refining capacity that can be tapped," he said.
As fast as gas prices have risen, they remain far below last year at this time when a gallon of gas cost almost $1.50 more. No one is predicting gasoline will get close to the $4.11 national average reached last July.
In other Nymex trading, gasoline for June delivery fell 2.53 cents to settle at $1.6802 a gallon and heating oil dropped 1.75 cents to settle at $1.5009 a gallon. Natural gas for June delivery slid less than a penny to settle at $4.302 per 1,000 cubic feet.
In London, Brent prices fell 66 cents to settle at $57.48 a barrel on the ICE Futures exchange.
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Associated Press writers George Jahn in Vienna, and Alex Kennedy in Singapore contributed to this report.
Source: AP News
