NEW YORK Oil prices spiked to a new trading high Tuesday, sweeping toward $130 a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.
The June contract for light, sweet crude traded as high as $129.58 on the New York Mercantile Exchange before settling back to $129.12, up $2.07. The imminent expiration of the June contract created additional volatility in the market, and raised the very real possibility that crude could hit $130 before the end of the day, when the contract was ending.
Oil's trek toward $130 coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month. The combination raised fears that inflation will slice into Americans' discretionary spending, and that sent stocks falling sharply on Wall Street.
Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., said prices were being supported by strong demand for diesel fuel in Asia, and a weakening of the U.S. dollar against the euro, which makes oil cheaper for some investors overseas.
"We're getting a combination of two price drivers this morning," he said.
Oil prices are now about twice as high as the were just a year ago. Prices have been propelled by a number of factors, including supply concerns, soaring global demand and a sliding dollar.
This latest surge comes after OPEC's president was quoted as saying his organization won't increase its output before its next meeting in September, adding to lingering worries about global supply.
The contract reached a new closing high of $127.05 Monday 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 won't increase its output during the U.S. summer driving season, which begins this weekend. OPEC's next meeting is scheduled for Sept. 9.
Through Monday's close, the front-month contract has hit nine trading or closing records in 11 sessions. Analysts have said speculative buying has also contributed to oil's record high run.
In other news lifting prices, 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, New Mexico, 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 15th time this year, up 1.8 percent or 6.9 cents to a record $3.791 a gallon," noted Stephen Schork in his Schork Report. "Gasoline at the pump is averaging 28.5 percent above last year's pace."
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.
In other Nymex trading, heating oil futures rose 9.58 cents to $3.7709 a gallon while gasoline prices rose 5.92 cents to $3.2958 a gallon. Natural gas futures rose 29.1 cents to $11.245 per 1,000 cubic feet.
In London, Brent crude for July delivery added $2.46 to $127.52 on the ICE Futures Exchange.
Associated Press Writers Thomas Hogue in Bangkok, Thailand and George Jahn in Vienna, Austria contributed to this report.