New reports showing improvement in the housing and services sectors combined with encouraging employment data to send oil and gasoline prices to an 18-month high Monday.
After months of trading in a range of $75 to $85, a recent rally driven by positive U.S. economic news has some analysts wondering if oil could make its first foray into triple digits since late 2008. But that's also raised concerns about an increase in gasoline prices that could hurt consumers just as they're starting to spend again.
On Monday, reports on pending home sales and the service sector came in better than expected. At the end of last week, the Labor Department said the country posted its best growth in jobs in three years and its fastest growth in industrial activity since July 2004.
Benchmark crude for May delivery rose $1.75 to settle at $86.62 a barrel on the New York Mercantile Exchange. On Thursday, the contract climbed $1.11 to settle at $84.87. Global oil trading was closed for the Good Friday holiday.
Oil now appears to be in a new range that could go to $95 or higher, according to oil trader and analyst Stephen Schork.
October 2008 was the last time oil rose above $100. Adam Sieminski, chief energy economist for Deutsche Bank, said last week that he's worried that triple-digit oil would push the global recovery back into recession.
If China continues growing while oil supplies come down, "presumably you might be able to get $100 per barrel," Sieminski said.
Gasoline prices tend to rise in spring as refineries produce more expensive blends to reduce smog in warmer weather. Rising oil prices could exacerbate that increase.
In its weekly report, the Energy Information Administration said Monday that the national average pump price last week was $2.83, up 3 cents from the week before and 79 cents higher than a year ago. California drivers paid the most at $3.09 a gallon. Pump prices were lowest in Gulf Coast states, where they averaged $2.72.
As prices approach $3 per gallon, a mark many analysts expect gas will hit over the next few weeks, the worry is that motorists will cut back spending on fuel and elsewhere.
"It's a price where you start to see demand destruction begin to kick in," Schork said.
Not that motorists and American companies are using a lot of crude products now. Consumption of gasoline, diesel fuel, heating oil and jet fuel remains sluggish and markets are well supplied. The biggest sign of strength is from manufacturers who have boosted consumption as they fire up the nation's factories.
Gasoline prices that hit $4.11 per gallon in July 2008 helped push the country into the worst recession in decades. Oil prices, which hit $147 that month, fell to $33 by December.
In other Nymex trading in May contracts, heating oil rose 5.08 cents to settle at $2.2675 a gallon, and gasoline gained 2.65 cents to settle at $2.3502 a gallon. Natural gas picked up 19.1 cents to settle at $4.277 per 1,000 cubic feet.
In London, Brent crude added $1.87 to settle at $85.88 on the ICE futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.
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