Oil prices settle a little higher
Oil and gasoline prices barely budged Tuesday, as traders took a break from a recent rally driven by signs of an improving economy, AP reported.
Benchmark crude for May delivery rose 22 cents to settle at $86.84 a barrel on the New York Mercantile Exchange. Earlier prices touched a new 18-month high of $87.09 a barrel. Oil prices have climbed 24 percent since February.
Crude traded between $69 and $84 for about nine months before breaking above that range last week. On Monday, reports showed improvements in services businesses and in the housing market.
Oil analyst Stephen Schork said Friday's encouraging jobs data helped fuel crude's rally, since an uptick in manufacturing jobs should help boost domestic energy demand "from coal to fuel furnaces to diesel to fuel freight transport." The Labor Department said employers added 162,000 jobs in March, the largest job gain in three years.
Still, American consumers are looking at a 9.7 percent unemployment rate and gasoline prices that have reached a high for the year.
The average U.S. retail price for gas hit $2.83 per gallon Tuesday, according to AAA, Wright Express and Oil Price Information Service. The price has risen 8.3 cents in the past month and now is 79.1 cents a gallon higher than a year ago.
Many oil analysts expect pump prices to rise to $3 per gallon, a price point that could trigger consumer cutbacks in fuel and other spending.
"Increasing gasoline prices at the pump...(has) a tendency to strangle growth," Schork warned.
Schork thinks the nation's economic recovery remains fragile and the already high unemployment rate could rise as discouraged workers hunt for jobs that haven't yet materialized.
A stronger dollar and weaker equities tempered oil prices in Tuesday trading. A stronger dollar makes dollar-denominated crude more expensive for holders of other currencies.
Meanwhile, the Energy Information Administration released its monthly short-term energy outlook, which did little to move energy prices. The outlook remained mostly in line with last month's report except for a sharp reduction in the natural gas price forecast. EIA now expects benchmark natural gas to price at $4.44 per million Btu on average this year, down from $5.17 per million Btu predicted in March. EIA cut the outlook mainly because of an upward revision of 2 billion cubic feet per day to the 2010 domestic natural gas production forecast.
In other Nymex trading in May contracts, heating oil rose a fraction of a penny to settle at $2.2683 a gallon, and gasoline dropped 0.19 cent to close at $2.3483 a gallon. Natural gas lost 18.1 cents to settle at $4.096 per 1,000 cubic feet.
In London, Brent crude prices slid 9 cents to $85.79 on the ICE futures exchange.