Oil soars to new six-month high above $65/barrel

NEW YORK (AP) – Oil prices closed above $65 per barrel Thursday for the first time in six months as OPEC maintained crude production levels as expected and a pair of reports suggested a slightly brighter economic picture.

Benchmark crude for July delivery added $1.63 to settle at $65.08 a barrel on the New York Mercantile Exchange.

In London, Brent prices gained $1.89 to settle at $64.39 a barrel on the ICE Futures exchange.

US retail gas prices have shadowed oil prices, ticking higher every day this month. Gas prices are not only rising because of crude. Refiners, stung by falling demand for gasoline, have cut back sharply on production this year.

The national average pump price increased 1.5 cents overnight to $2.449 a gallon (65 cents a liter), according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 40.1 cents a gallon more expensive than last month, but it’s still $1.495 a gallon cheaper than a year ago.

US energy consumption still hovers at its lowest level in a decade, however, because of the recession.

The Energy Information Administration said Thursday that US storage facilities added another 106 billion cubic feet of natural gas last week, putting the overall surplus well above the five-year average.

That’s largely because manufacturers and other big industrial power users have been slashing production and cutting jobs.

The lack of spending on energy over the past several months has meant growing supplies and lower prices, at least compared with last year.

On Thursday, however, the Organization of Petroleum Exporting Countries stood firm on production levels. Oil prices have nearly doubled since the beginning of the year as the group uncharacteristically complied with production quotes for the most part.

Even though a huge glut of oil remains, OPEC president Jose Maria Bothelo de Vasconcelos said Thursday that the organization has seen hints of an economic upturn.

Signs that OPEC cuts may be working have showed up weekly in US government reports about the level of unused crude in storage.

The government reported Thursday that US oil supplies dropped unexpectedly by 5.4 million barrels last week. Though crude inventories remain near 19-year highs, it was the third week in a row that supplies have fallen.

With petroleum prices, “the biggest drag until now was the oversupply in everything. That’s starting to change slowly,” said Phil Flynn, an analyst at Alaron Trading Corp. “We saw the big pad of crude oil drop a little bit. And demand for oil has probably bottomed out. We may see demand start to go up.”

Crude prices had fallen in the early part of the year despite OPEC cuts, but there are some indications that spending may be picking up, the other half of the equation that determines energy prices.

The government reported Thursday that demand for big-ticket manufactured goods in April took the biggest leap upward in 16 months. It was the second increase in the past three months.

And the number of newly laid-off people requesting jobless benefits fell last week, the government said Thursday, an indication that the huge layoffs that have rattled consumer confidence may be slowing.

In other Nymex trading, gasoline for June delivery rose 1.88 cents to settle at $1.9105 a gallon and heating oil added 3.97 cents to settle at $1.6014 a gallon. Natural gas for July delivery rose up 31.9 cents to settle at $3.957 per 1,000 cubic feet.