Crude oil prices push toward $90 a barrel

Crude oil prices have climbed since hitting a low for the year in mid-May. Gas prices have followed.
By Steven Mufson
Washington Post Staff Writer
Friday, December 10, 2010; 8:37 PM

Crude oil prices have flirted with the $90 a barrel threshold this week, pushing up gasoline prices at the pumps and crimping consumers in the middle of the peak shopping season.

The $90 level was last seen in early October 2008 when crude oil prices were plunging along with the economy.

But oil prices have retraced their steps in the halting global recovery. The International Energy Agency on Friday raised its monthly forecast for global crude oil demand in 2011 for the third consecutive time.

That's good news for the Organization of Petroleum Exporting Countries, whose members are meeting Saturday in Quito, Ecuador. The group, which accounts for about 40 percent of world supplies, is expected to make no change in its output quotas.

For U.S. consumers, the news is not so good. The nationwide average price for regular gasoline prices has risen to $2.98 a gallon, up a dozen cents in the past month and 35 cents higher than a year ago.

Oil analysts blamed the rise in oil prices in recent weeks to a variety of factors: The Federal Reserve's plan to buy Treasury bonds to stimulate the economy; the ramping up of new refineries in China this fall; and an unusually cold start to winter in Europe and Asia, leading to a drawdown of petroleum inventories.

"It's a winter wonderland," said Edward Morse, a veteran energy analyst at Credit Suisse who cited the cold snap.

But Morse and others predicted that crude oil prices - which have fluctuated between $68 and $89 a barrel this year - would probably stay within a relatively narrow range. The price of oil for January delivery fell 58 cents Friday to $87.79 a barrel.

Roger Diwan, an oil expert at PFC Energy, a Washington advisory firm, said that despite a rise in consumption, there was plenty of oil supply, refinery capacity and transportation available.

"There are seasonal issues and money allocation issues," he said, "but I don't think there's the making of a big bubble."

Indeed, despite widespread concern about a weaker dollar and inflation, oil traders and investors are also worried that China's moves to rein in inflation could lead to a slowdown in its rapid growth rate.

On Friday, the People's Bank of China boosted financial reserve requirements for the nation's banks, a step aimed at curbing lending.

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