Oil Prices Spike, Low Expectation For July

Morgan Stanley Analyst Ole Slorer Predicts Prices Could Reach $150 Per Barrel By Independence Day

(AP)  Light, sweet crude for July delivery jumped as high as $139.01 on the Nymex, before easing slightly to $138.39, up $10.60. Prices hit a previous record of $135.09 a barrel on May 22, and settled Thursday at $127.79.

Prices pushed sharply higher Friday after Morgan Stanley analyst Ole Slorer predicted strong demand in Asia could drive prices to $150 by Independence Day, when millions of Americans are expected to take to the roads. Slorer said shipments from the Middle East are mimicking patterns seen in the third quarter last year, when Morgan Stanley based an oil price spike prediction on falling supplies in the Atlantic.

"We made the same call using the same parameters, but now we are starting from much lower inventory levels," Slorer said.

Traders also zeroed in on remarks by an Israeli Cabinet minister, who was quoted as saying his country will attack Iran if it doesn't abandon its nuclear program. Transportation Minister Shaul Mofaz added that Iranian President Mahmoud Ahmadinejad "will disappear before Israel does," the Yediot Ahronot daily reported.

Iran is the second-biggest producer in the Organization of Petroleum Exporting Countries, and traders worry that any conflict with Israel could disrupt global supplies.

Friday's surge builds on a $5.49 gain Thursday, which was the biggest single-day price increase in the history of the Nymex crude contract. That spike came as the dollar fell after the European Central Bank suggesting it could raise interest rates.

"With oil pushing back up to the mid-$130s, it's the make it or break it point. If we go past that, we set the course for uncharted waters and head up toward $150," said Stephen Schork, an analyst and trader in Villanova, Pa."

Meanwhile, U.S. gas prices at the pump continued to hover just shy of an average $4 a gallon, easing only 0.3 cent from Thursday's record.

Drivers are now paying an average of $3.99 for a gallon of regular gas nationwide, according to AAA and the Oil Price Information Service; in many parts of the country, consumers are already paying well over $4. Retail diesel slipped a penny overnight to $4.76.

Pump prices are bound to rise even further if oil sustains its advance. James Cordier, president of Tampa, Fla.-based trading firm Liberty Trading Group, predicted prices could rise to $4.25 as early as the end of the month.

"Unfortunately, drivers cutting back isn't going to lower the price of gasoline any time soon," he said.

The dramatic reversal in what had been a weakening oil market began Thursday after ECB President Jean-Claude Trichet suggested the bank could raise interest rates and the euro climbed against the dollar. When interest rates rise in Europe, or fall in the U.S., the dollar tends to weaken against the euro.

Many traders buy commodities such as oil as a hedge against inflation when the dollar is falling, and a weaker dollar makes oil cheaper for investors dealing in other currencies. Analysts believe the dollar's protracted decline has been a major reason why oil prices have nearly doubled in the past year.

The euro strengthened further against the greenback Friday. A Labor Department report showing the U.S. unemployment rate jumped half a percentage point to 5.5 percent last month - its biggest monthly increase since 1986 - could drag the dollar even lower in the days ahead.

"Unemployment jumping as it did today will be in the market for a long time and will continue to pressure the U.S. dollar," Cordier said.

In other Nymex trading, heating oil futures rose 23.72 cents to $3.918 a gallon while gasoline prices rose 15.7 cents to $3.4915 a gallon. Natural gas futures rose 25 cents to $12.769 per 1,000 cubic feet.

In London, July Brent crude shot up $7.75 to $135.30 a barrel on the ICE Futures exchange.

[forthepeopl1]

isn''t it the same as gambleing????? and we have to pay taxes on winnings???

so why not them???

[forthepeopl1]

and all the billions they makeing on speculating is tax free????

why???

[ajaxtheleast]

Bush assumes that all leaders of nuke-

bomb countries are sane people.

It''s possible that one day one of them

with the same thin-skinned ego as George

will take personal something that

George says or does and thinks "Oh what

the he11 I know I can land a few nukes

before they nail me." And we can kiss a

couple cities goodbye.

(Read this somewhere: A nuclear war asures
mutual destruction. But the first to start
dropping bombs is less mutually destroyed.)

[shanev137]

Repeat after me.

"I''m glad speculators are controlling our economy....pain and anger is my happiness"

[Razzl]

I''m betting that the Israeli public is no more willing to let it''s government launch an unnecessary world war than we would be to let Bush/Cheney do that. Transportation ministers don''t normally carry the menacing authority that Prime ministers do, so it sound to me like neocon bluster from the Isreali side of the Israel lobby...

[scottyusa]

Why does Irael have to drag us into it? If they attack Iran unprovoked that is their business. We did not help them with Syria. That statement was rather off the cuff since the Bush regime will be gone soon. Yes they are our ally and we would fight with them if they were attacked but I wouldn''t consider it necessary to help them if THEY start a war.

[naucoming4u]

Economic pain and misery is obviously what our country likes and wants.

Posted by shanev137 at 04:06 PM : Jun 06, 2008
............

As long as the "pain" does not interrupt any of the (so-called) Americans'' prime time reality shows!

[shanev137]

Nobody is doing anything about our economy.

Nobody is protesting about anything.

Economic pain and misery is obviously what our country likes and wants.

[naucoming4u]

Bush will attack Iran with what ?? The US military is over stretched already in Iraq and Afghanastan. But I do agree, I say avg. US National price per gallon will be $5-5.25 by 4th of July weekend.

Posted by ltahoe7195 at 03:58 PM : Jun 06, 2008
...........

The Air Force and Navy is not overstretched right now.

The absolute idiocy of this President and his regime will think that Iran will drop to their knees with a few air strikes!

Our men and women of the Air Force and Navy will be in for a big surprise when they realize that Iran has a lot more military hardware/technology (thanks to Russia and China), than just a few sling-shots and rifles!

[ltahoe7195]

Bush will attack Iran with what ?? The US military is over stretched already in Iraq and Afghanastan. But I do agree, I say avg. US National price per gallon will be $5-5.25 by 4th of July weekend.