NEW YORK – Oil prices rebounded Tuesday, jumping back above $115 barrel after the dollar weakened against the euro and a rally in heating oil attracted new buyers into energy markets.
Light, sweet crude for September delivery rose $2.73 to $115.60 in morning trading on the New York Mercantile Exchange, after alternating between positive and negative territory earlier in the day. The September contract expires Wednesday, adding to the volatility.
At the pump, retail gas prices continued to fall, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.
Crude began the day lower after Tropical Storm Fay missed oil and gas installation in the Gulf of Mexico, easing concerns about a disruption in supplies. But prices later spiked more than $3 a barrel, apparently driven higher by a surge in heating oil futures that triggered technical buy orders in energy markets, analysts said.
Heating oil futures jumped 9.79 cents, or 3.17 percent, to $3.1827 a gallon on the Nymex.
“Crude's just getting pulled up by heating oil. It was a quick pop and technical triggers may have been hit,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Also supporting prices Tuesday was a slightly weaker dollar compared to the euro. The 15-nation euro traded at $1.4765, up from $1.4697 late Monday in New York. A falling greenback encourages buying among investors seeking commodities like oil as a hedge against inflation or weakness in the U.S. currency.
Crude's rally came despite the easing threat from Tropical Storm Fay. The sixth named storm of the 2008 Atlantic hurricane season swept over southwest Florida early Tuesday, bringing heavy rain and wind but staying well clear of oil and gas platforms scattered across the Gulf. The storm was moving to the north and was expected to gradually weaken during the day. Fay steamed through the Caribbean over the weekend and was blamed for at least 14 deaths in Haiti and the Dominican Republic.
Royal Dutch Shell PLC said the storm no longer threatened its oil facilities in the Gulf and that it had begun redeploying 425 evacuated workers.
“We dodged a bullet with the storm,” said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Some recovery in oil was expected after steep price drops over the past month. Oil prices have shed about $35, or 24 percent, from their all-time trading record $147.27 reached July 11 amid mounting evidence that a cooling global economy and high fuel costs are curtailing demand for energy.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, “especially since there is a clear lack of buying momentum.”
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
A bearish forecast on Friday from the Organization of the Petroleum Exporting Countries of lower global oil demand growth also helped keep oil prices in check.
In its monthly report, OPEC forecast that the world's daily appetite for oil this year would grow by 1 million barrels, a reduction of 30,000 barrels a day from its previous estimate. It predicted growth for 2009 will be 900,000 barrels a day, the lowest growth in world demand since 2002.
Analysts said uncertainty over the conflict between Russia and Georgia will support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
In other Nymex trading, gasoline prices rose 5.82 cents to $2.874 a gallon., while natural gas futures added 14.6 cents to $8.034 per 1,000 cubic feet.
In London, October Brent crude rose $2.74 to $114.68 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
