Oil prices closed above $50 a barrel for the first time yesterday as concerns linger about damage to oil production in the Gulf of Mexico from Hurricane Ivan.
The retail prices of gasoline and diesel fuel also continued to rise yesterday, and analysts said that was likely to continue in coming days. Regular gasoline averaged $1.92 a gallon nationally, and diesel moved to $2.04 a gallon, according to an AAA auto club survey.
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U.S. benchmark crude for November delivery closed at $50.12 on the New York Mercantile Exchange, up 48 cents from the day before.
While prices had crossed the $50 level in trading earlier in the week, yesterday was the first time oil closed at that level in 21 years of trading on the mercantile exchange. Adjusted for inflation, the price is still lower than a 1981 peak.
Oil traders are concerned that global demand is pushing the limits of capacity and that world events could limit the availability of crude. Those fears were compounded by reports that nearly 500,000 barrels of daily oil production remained off-line yesterday because of hurricane damage. In recent days, traders also have been alarmed by potential fighting between rebels and government forces in Nigeria, an oil exporter.
Ed Silliere, vice president for risk management at Energy Merchant Corp. in New York, said refiners bought oil contracts yesterday, prompting speculators and others to follow.
"Continued loss of production out of the U.S. Gulf Coast has refiners a bit uneasy at the moment that they're not going to have the supplies they need for next month," he said.
Economists said that high oil prices have been a drag on the economy and that if prices are sustained, they likely will have wider repercussions.
Concerns about damage to oil platforms from the hurricane prompted the Energy Department to lend more oil from the nation's emergency stockpile yesterday. Astra Oil Co. of Huntington Beach, Calif., will receive a loan of 1 million barrels, a department spokesman said.
Astra was the fourth company to receive a loan, and officials said they would consider requests from other companies as well. The Energy Department has declined to disclose terms of the loans but has said the companies will have to repay the oil they borrowed, with additional supplies as interest.