WASHINGTON – Oil prices settled at a new high above $71 a barrel Tuesday as supply threats around the world overshadowed a new report from OPEC forecasting weakening global demand.
There was no fresh catalyst for Tuesday's buying, but analysts said the market psychology would likely remain bullish until there is some resolution to a variety of geopolitical uncertainties, particularly the West's nuclear dispute with Iran and output disruptions in Nigeria.
Global Insight oil analyst Kevin Lindemer said the slowing consumption growth and swelling inventories of crude oil in the United States would typically help pull down prices, but "all of that is getting swamped right now by Iran and Nigeria."
Light, sweet crude for May delivery on the New York Mercantile Exchange rose as high as $71.60 a barrel, surpassing the previous intraday record of $70.85 set Aug. 30. Oil settled at $71.35, an increase of 95 cents from Monday's record closing price.
With gasoline prices averaging $2.79 a gallon, U.S. motorists are shelling out $212 million per day more than a year ago, and President Bush said Tuesday he was "concerned" about the impact this was having on American families and small businesses.
"We will feel real pain at the pump before this market tops out," said James Cordier, president of Liberty Trading in Tampa, Fla. Cordier predicted gasoline prices could rise as high as $3.50 a gallon in some parts of the country this summer.
So far, demand for gasoline continues to rise, albeit at a slower pace, according to Energy Department data.
In its latest monthly report, the Organization of Petroleum Exporting Countries on Tuesday revised its demand-growth forecast for 2006 to 1.42 million barrels a day, down from 1.46 million barrels per day in the previous report. The cartel estimates that global crude-oil demand will be slightly above 84.5 million barrels per day — about half a million barrels per day lower than the current Wall Street consensus.
OPEC expressed particular concern about the impact rising interest rates would have on consumer spending in the U.S., where gasoline demand grew at a slower rate in the first quarter and could "carry over into the second half of the year."