NEW YORK (AP) — Oil climbed above $111 per barrel Wednesday as the dollar weakened and the government reported an unexpected drop in U.S. crude supplies. Gas pump prices also edged higher to $3.84 for a gallon of regular.
Benchmark West Texas Intermediate oil for June delivery gained $2.86 at $111.14 per barrel in midday trading on the New York Mercantile Exchange. Oil has increased 20 percent since the beginning of the year as investors anticipated rising global demand and unrest in North Africa and the Middle East threatened oil fields and shipping lanes vital to world supply.
The surge in oil had cooled recently as industry groups monitor the effect of higher prices on petroleum demand and the global economy.
The International Energy Agency, OPEC and others have said that they see signs that consumers are using less fuel as prices rise. In the U.S., retail surveys by MasterCard SpendingPulse indicate that motorists have cut back on gasoline purchases for the past seven weeks.
Oil rose Wednesday as the dollar dropped relative to other major currencies. Oil, which is priced in dollars, tends to rise as the dollar falls. That makes crude contracts cheaper for investors holding foreign currency.
The Energy Information Administration reported that U.S. oil supplies unexpectedly shrank by 2.3 million barrels last week. Analysts expected an increase of 1.6 million barrels. Gasoline supplies also fell by 1.6 million barrels last week.
Some analysts have pointed to falling supplies as a sign that U.S. demand is holding steady. Yet Andrew Lipow, President of Lipow Oil Associates in Houston, said the drop in gasoline supplies may have more to do with many refineries along the East Coast being on hold for routine maintenance and other issues.
EIA data shows that gasoline demand has dropped for the past three weeks, when compared with levels from a year ago.
Gasoline pump prices keep rising nevertheless. The national average increased slightly on Wednesday to $3.837 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 28.8 cents higher than it was a month ago and 97.8 cents higher than a year ago.
Fred Rozell, the retail pricing director at OPIS, said pump prices should increase a little more this summer as refineries switch to summer gasoline blends that are more expensive to produce. Summer blends already account for roughly 80 percent of the gasoline sold, Rozell said. The rest will be at the pumps in the next several weeks.
Still, "I don't think we'll get to $4 per gallon nationally," Rozell said. "If we do, it'll be a very brief phenomenon and I think prices will retreat."
In other Nymex trading for May contracts, heating oil added 6 cents at $3.2138 per gallon and gasoline futures increased 4 cents to $3.2714 per gallon. Natural gas gained 8 cents at $4.340 per 1,000 cubic feet.
In London, Brent crude rose $2.17 to $123.50 per barrel on the ICE Futures exchange.