clock menu more-arrow no yes

Filed under:

Oil prices hit 10-month high as optimism grows

NEW YORK — Oil prices jumped Friday to a new high for the year after Federal Reserve Chairman Ben Bernanke said that the U.S. economy is nearing a recovery and other economic data backed him up.

Benchmark crude for October delivery rose 98 cents to settle at $73.89. After Bernanke spoke at an annual Fed conference in Jackson Hole, Wyo., prices briefly neared $75.

The price for natural gas plummeted to a new seven-year low, which suggests some skepticism about an economic rebound. Natural gas is used by major industries, including utilities, for power.

Energy experts had a hard time explaining how natural gas can plunge while prices for other energy futures, including heating oil and gasoline, continue to rise.

"If there's a recovery, people would be using electricity first before they buy gasoline," said Peter Beutel at Cameron Hanover. "Yet oil prices are going up and natural gas prices are down."

Oil started climbing early in the morning after financial information company Markit said its composite purchasing managers' index showed the European economy was stabilizing.

"If Europe's coming out of recession, the euro could get even stronger," analyst Phil Flynn said. "That means more demand for oil."

And the dollar did fall against the euro to end the week, effectively making dollar-based oil cheaper across the globe. That created its own momentum and drew a lot of investor money into crude, meaning the price for gasoline and other fuels will likely move up as well.

Gasoline prices have flattened and few expect a major run on prices as the driving season winds down.

Retail gas prices were almost unchanged, rising a hundredth of a cent to a new national average of $2.625 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 16.4 cents more expensive than it was a month ago, but it's $1.077 cheaper than last year.

In addition to the falling dollar and other upward pressures on energy prices, new housing data showed that people are buying.

Just as Bernanke began to speak, the National Association of Realtors said that home resales posted the largest monthly increase in at least 10 years, which may have helped push energy prices higher.

Crude this year has tended to jump even marginally good economic news. It has been slightly more than a year since a barrel of crude soared close to $150 per barrel and few people believe that at some point, demand for energy will not rebound strongly.

The question is when.

Earlier this week, the U.S. government reported that crude in storage, which had been building for weeks, fell by a surprising 8.4 million barrels as refiners cut back on petroleum imports. Crude prices jumped sharply.

In other Nymex trading, gasoline for September delivery added 1.34 cents to settle at $1.9956 a gallon and heating oil for September delivery added 1.97 cents to settle at $1.9049 a gallon. Natural gas for September delivery tumbled another 14.1 cents to settle at $2.804 per 1,000 cubic feet.

In London, Brent prices rose 86 cents to settle at $74.19 a barrel on the ICE Futures exchange.

Associated Press writers George Jahn in Vienna and Alex Kennedy in Singapore contributed to this report.