WASHINGTON — Oil futures retreated below the $50-a-barrel level Monday, though analysts said there is enough uncertainty about geopolitics and weather — and the industry's ability to quickly boost crude output — to keep prices from plummeting anytime soon.
Light crude futures for November delivery settled 21 cents lower at $49.91 on the New York Mercantile Exchange.
The retail price of gasoline, however, rose for the third straight week to an average of $1.94 per gallon, the Energy Department reported Monday. The average price nationwide of regular-grade unleaded gasoline increased 2.1 cents last week to $1.938, the government survey said. Prices are 36.5 cents higher than a year ago.
Average nationwide prices peaked at $2.06 a gallon during the week ending May 22.
Oil market traders said tensions have eased somewhat due to a Nigerian militia leader's tentative agreement late last week to disarm the fighters he had threatened to use to wage a "full-scale" war in the country's oil-rich Niger Delta.
The drop in oil prices also comes as traders await the release Wednesday of petroleum supply data maintained by the government.
Last week, the Energy Department data revealed an unexpected increase in the nation's oil supply despite continued problems with crude production in the Gulf of Mexico more than two weeks after Hurricane Ivan swept through the region.
"Everybody was betting on a big decrease last week and it didn't happen," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "This week everyone's being a little cautious."
After growing by 3.4 million barrels from the prior week, the nation's inventory of commercially available crude oil stood at 272.9 million barrels on Sept. 24, down 4 percent from a year ago.
The supply of distillate fuel, which includes heating oil and jet fuel, is also down 4 percent from a year ago, raising some concerns among traders because the home-heating season is just around the corner.
"If we get hit with a cold winter, supplies could get very tight," Flynn said.
Daily oil output in the Gulf of Mexico is 28.5 percent below normal at roughly 1.2 million barrels — the same level it was at a week ago, according to the federal Minerals Management Service. More than 13 million barrels of oil production have been lost since Sept. 13.
To help refiners whose oil supply was disrupted by Hurricane Ivan, the Bush administration has loaned 4.2 million barrels of oil from the nation's emergency stockpile. But by tapping the Strategic Petroleum Reserve in such a limited way, there has been no noticeable impact on prices.
"It's certainly not going to make up for what we've lost in production," said Tom Bentz, a trader at BNP Paribas Futures in New York.
A larger worry among oil analysts is that that the world's supply buffer, or excess capacity, is just 1 percent of daily global demand of 82 million barrels. That leaves the industry little breathing room in the event of a prolonged supply interruption. It also is why prices inched higher all summer long as Iraqi oil pipelines were attacked and Russian oil giant Yukos warned that output might suffer due to a multibillion-dollar back-taxes bill.
Many analysts expect oil prices to remain high — above $40 a barrel — into 2005.
Oil prices are more than 60 percent higher than a year ago, but when adjusted for inflation, still remain around $30 below the level reached in 1981.