Oil prices rise on holiday sales, Europe hopes

AP News
Posted: Nov 28, 2011 3:33 PM
Oil prices rise on holiday sales, Europe hopes

Oil prices climbed above $98 per barrel Monday after shoppers pumped up holiday retail sales in the U.S., and investors bet that Europe would find a last-minute solution to its financial crisis.

Benchmark crude rose $1.44 to end the day at $98.21 per barrel in New York. Brent crude, which is used to price foreign oil _ including much imported by U.S. refineries to make gasoline _ rose $2.26 to finish at $108.02 a barrel in London.

Benchmark oil has recovered much of the ground it lost since Nov. 16, when it hit $102.59 a barrel. Prices rebounded Monday following strong holiday sales in the U.S, where shoppers spent nearly $1 billion more on Black Friday than they did a year ago. The robust weekend sales are a promising sign that consumers are opening their wallets a little wider.

"The U.S. is probably doing better than we gave it credit for," PFGBest analyst Phil Flynn said. "Consumers are buying more, and that's going to get manufacturers to produce more products, and it'll take more energy to make and distribute those goods."

Meanwhile European leaders are considering new solutions to their credit problems, with little time to left to preserve the euro currency and perhaps head off a recession in the region. Among the ideas is a plan for eurozone countries with the best credit to pool their resources to assist the most indebted members of the 17-nation currency block.

Some analysts say the euro could collapse in days, unless action is taken.

Oil prices climbed along with a surge in world stock markets. Stock indexes in Italy, Germany and France rose more than 4 percent on Monday. In the U.S. the Dow Jones industrial average, the Standard & Poor's 500 and the Nasdaq all rose more than 2 percent.

At the gas pump, prices fell less than a penny to a national average of $3.295 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 15 cents cheaper than it was a month ago, but it's still more than 43 cents higher than a year ago.

Analysts say retail gasoline could fall by another nickel or so by the end of the year, but probably not much more. U.S. refineries are already taking a loss on the gasoline they make, and many are expected to cut production to force prices higher. To firm up their bottom lines, refineries are producing as much high-priced diesel fuel as possible.

"They're either going to pick it up even more on the diesel side, or they're going to have to reduce their runs," independent analyst Jim Ritterbusch said about pricing.

In other energy trading, heating oil rose 4.26 cents to finish at $2.9699 per gallon, and gasoline futures rose 6.92 cents to finish at $2.5181 per gallon. Natural gas fell 17.8 cents, or 5 percent, to end the day at $3.3640 per 1,000 cubic feet.