Oil Jumps on Surprise Supply Drop
NEW YORK (AP) - Oil surged Wednesday, rising a remarkable $5 a barrel to a new record over $104 after the government reported a surprise drop in crude oil stockpiles and OPEC held production levels steady.
Most analysts had expected the Energy Department's Energy Information Administration to report oil supplies rose last week for the eighth straight time. Instead, they fell by 3.1 million barrels.
In Vienna, meanwhile, the Organization of Petroleum Exporting Countries said it would hold production levels steady, at least for now.
The EIA report and OPEC announcement fed a new frenzy of investing in oil futures, which have risen to new inflation-adjusted records this week as the falling dollar drew new investors to the market.
Light, sweet crude for April delivery jumped $5 to settle at a record $104.52 a barrel on theNew York Mercantile Exchange. Shortly after the Nymex closed, oil briefly rose to $104.95, a new trading record. Earlier this week,oil prices broke the previous inflation-adjusted price record of $103.76, set in 1980 during the Iran hostage crisis.
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 dollar is falling.
At the pump, meanwhile, gas prices rose a cent to a national average of $3.178 a gallon, according to AAA and the Oil Price Information Service. Gas prices have been following oil's recent rally, and are 69 cents higher than a year ago. Many analysts expect prices to rise to near $4 a gallon this spring and summer as driving demand picks up.
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