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Crude tops $100 mark

An array of factors contribute to oil futures closing above $100 for the first time.

NEW YORK - Oil futures shot higher Tuesday, closing above $100 for the first time as investors bet that crude prices will keep climbing despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.

There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000-barrel-per-day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, the threat of new violence in Nigeria and continuing tensions between the United States and Venezuela.

The fact that there was no overriding reason for such a price spike could be a bad omen for consumers already bearing the burdens of high heating costs and falling real estate values. Many recent forecasts have said oil demand growth this year will be less than initially expected, yet prices continue to rise. That suggests they may continue rising as the weakening dollar attracts new investors to the futures market.

And rising oil prices mean higher gas prices.

"As the economy weakens, it's going to be met with $3.50 and $3.60 gasoline," said James Cordier, founder of OptionSellers.com, a Tampa trading firm. "And that really spells trouble for the consumer."

Light, sweet crude for March delivery rose $4.51 to settle at a record $100.01 a barrel on the New York Mercantile Exchange after earlier rising to $100.10, a new trading record. It was the first time since Jan. 3 that oil had been above $100. Oil prices are still within the range of inflation-adjusted highs set in early 1980.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

"I really think...crude oil's going to soar through $100," Cordier said.

At the pump, meanwhile, gas prices jumped 1.8 cents to a national average price of $3.032 a gallon for regular unleaded Tuesday, according to AAA and the Oil Price Information Service. In Florida, the average was $3.011, and in the Tampa Bay area, it was $3.05. The Energy Department and many analysts expect gas prices to peak this spring well above last May's record of $3.227 a gallon.

Gasoline and heating oil prices appeared to lead Tuesday's wide advance in energy prices due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for two months.

"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

A threat by a rebel group in Nigeria to escalate attacks on the nation's crude oil infrastructure helped boost oil prices. And traders are focused on OPEC, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements last weekend about the country's legal dispute with Exxon Mobil Corp.

OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the United States, but also threatened to sue Exxon Mobil.

[Last modified February 20, 2008, 01:08:13]