WASHINGTON – Oil prices leapt above $72 a barrel Wednesday, settling at a record high for the third straight day after a government report showed shrinking U.S. gasoline supplies and traders focused on nuclear tensions between Iran and the international community.
Supply constraints in Iraq, Nigeria and the Gulf of Mexico are also pushing oil prices higher, and analysts are predicting more pain at the pump for motorists, who so far appear to be only lightly tapping the brakes on demand.
Light sweet crude for May delivery climbed as high as $72.40 a barrel, before settling at $72.17 on the New York Mercantile Exchange, an increase of 82 cents from the previous day. The contract had risen as high as $71.60 on Tuesday.
Oil futures contracts through July 2009 are now trading above $70 a barrel. "In effect, the market is saying this is going to be with us for a while," said A.G. Edwards & Sons commodity analyst Bill O'Grady.
In its weekly report, the U.S. Energy Department said the nation's supply of gasoline shrank by 5.4 million barrels last week to 202.5 million barrels, or 4.6 percent below year ago levels.
Gasoline inventories typically decrease this time of year as refiners shut down their plants to perform maintenance ahead of the summer driving season. And oil traders typically point to the decreases as reason for concern about summertime supplies, a routine that, more often than not, sends futures prices higher.
That said, there is additional worry about summer gasoline supplies because of the prospect of tight supplies of ethanol, which is needed in increasing amounts as refiners phase out their use of methyl tertiary butyl ether, or MTBE, which has been found to contaminate drinking water.
Oil analyst John Kilduff of Fimat USA in New York said there would be a "painful runup" in gasoline prices as summer approaches, and he said oil prices could rise as high as $80 a barrel by the end of June. Purchased today, crude for June delivery costs $74 a barrel.