Oil prices surged to a new trading record above $129 a barrel Tuesday amid continuing concern about global supply.
U.S. light crude for June delivery reached $129.31 a barrel in electronic trading, surpassing the previous intraday mark of $127.82 hit Friday as it smashed through the $128 barrier in a matter of minutes. At 9:22 a.m. ET, the contract was up $1.95 at $129.
Nauman Barakat an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank, said the surge was led by distillates, which jumped 10 cents a gallon in early morning trade.
Barakat said he'd seen no news that would have caused the jump, but noted how strong demand for distillates, which are used to make diesel fuel and heating oil, has been pushing up the price for those fuels in recent weeks.
Oil closed above $127 for the first time Monday. The rally came after Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, was quoted by a government newspaper as saying OPEC would not increase its output during the U.S. summer driving season.
Close to the record
OPEC's next meeting is scheduled for Sept. 9.
Concern about supply has recently become the primary driver of the market, replacing earlier worries about a weakening dollar, and not even Saudi Arabia's promise last week of an additional 300,000 barrels of crude a day could alleviate those new concerns.
Despite that promise from the world's leading oil producer and the U.S. move to temporarily stop filling government stockpiles, prices have shown no indication of stopping their record run.
Through Monday's close, the front-month contract has hit nine trading or closing records in 11 sessions.
In other price-supportive news ahead of the U.S. driving season, independent refiner Holly Corp. said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day. The shutdown occurred while the fluid catalytic cracking unit was being brought back online from a previous shutdown May 7.
The refinery in Artesia, N.M., is Holly's largest.
As oil prices reach new heights, so have gasoline and diesel costs.
"Average gasoline prices in the U.S. rose for an eighth straight week and for the fifteenth time this year, up 1.8% or 6.9 cents to a record $3.791 a gallon (3.8 liters)," noted Stephen Schork in his Schork Report. "Gasoline at the pump is averaging 28 1/2% above last year's pace.
"Meanwhile, average diesel prices are up by 43% or $1.134 a gallon. As of Monday prices rose 3.7% to a $4.497 per gallon average!"
Drivers in some parts of the U.S. are paying considerably more, however. Gas pump prices in parts of California have been stuck above $4 a gallon for weeks now.