Benchmark oil price rises above $102 per barrel

AP News
Posted: Jan 10, 2012 3:04 PM
Benchmark oil price rises above $102 per barrel

Oil prices climbed Tuesday on expectations that China's economy _ and its appetite for petroleum _ will continue to grow in 2012.

Benchmark crude rose by 93 cents to finish at $102.24 per barrel in New York. Brent crude, used to price foreign oil varieties that are imported by U.S. refineries, rose 83 cents to end at $113.28 per barrel in London.

Prices rose after China said oil imports grew 6 percent in December, when compared to a year earlier. China is the world's second biggest oil consumer behind the U.S. Strong demand for oil in China will likely help support higher global crude prices in 2012.

Manufacturers are looking to China and other emerging economies for strong growth this year. Aluminum maker Alcoa on Monday was the first major U.S. company to report fourth-quarter earnings. Although it posted a loss, Alcoa offered a bullish outlook for the year, expecting strong demand from China.

Stocks rose on hopeful signs for the global economy. Major indexes were up about 1 percent in afternoon trading.

Energy commodities and stock markets are "being turbo charged by U.S. economic optimism," independent analyst Jim Ritterbusch said.

Investors were also reassured about measures to address Europe's debt problems after credit ratings agency Fitch Ratings said it won't downgrade France this year. A downgrade would have made it more expensive for France to raise cash to deal with the crisis.

Elsewhere, the security of world oil supplies remained a major concern for oil traders.

Nigeria, a top oil supplier to the U.S., has been embroiled in widespread protests and violence following the government's decision to end subsidies, more than doubling the price of gasoline. Nigeria exported about 857,000 barrels per day of oil to the U.S. in 2011, supplying nearly 5 percent of the country's demand, according to the Energy Information Administration.

Iran still threatens to close the Strait of Hormuz in the Persian Gulf, if the U.S. and other countries impose more sanctions on its nuclear program. Although experts doubt Iran could attempt a blockade without swift military intervention from the U.S., any supply shortages this year would further squeeze oil markets at a time when they're already falling behind world demand.

The EIA said Tuesday that it expects the U.S. and other nations will be forced to dip deeper into spare petroleum supplies later this year. EIA's monthly outlook predicted that world demand will grow by 1.5 percent this year and by another 1.7 percent in 2013.

EIA predicted that oil prices will rise to an average of $100.25 per barrel this year and to $103.75 in 2013. Gasoline prices will fall slightly to an average of $3.48 per gallon, from last year's $3.52 average, before rising again in 2013 to $3.55 per gallon.

U.S. gas pump prices on Tuesday averaged $3.37 per gallon _ unchanged from Monday _ according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 9 cents higher than it was a month ago and 28 cents higher than a year ago.

MasterCard SpendingPulse said Tuesday that American drivers continued to buy less gasoline last week with prices at the highest level ever for this time of year. Its survey of consumer spending showed that demand was down 3.3 percent as of Jan. 6, when compared with the same period last year.

In other energy trading, natural gas prices fell 7 cents to finish at $2.94 per 1,000 cubic feet. Prices have declined this year as analysts predict that U.S. supplies will be more than ample after a mild winter that's cut into heating demand.

Natural gas is beginning 2012 at the cheapest level in a decade, comparing with the start of previous years. Bank of America Merrill Lynch analysts cut their price forecasts for natural gas by $1 to an average of $3.30 per 1,000 cubic feet in 2012.

"As a result of a warm winter and rampant production growth, we are now starting the new gas year with historically high storage levels and an incredible supply glut," Bank of America analyst Sabine Schels said.

Heating oil rose by 3 cents to end at $3.10 per gallon and gasoline futures rose 1 cent to finish at $2.77 per gallon.

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