Crude oil rose above $120 a barrel to a record in New York on Monday after a report showed that U.S. service industries expanded in April, signaling higher energy use.
Crude oil for June delivery climbed $3.65, or 3.1 percent, to settle at $119.97 a barrel at 2:42 p.m. on the New York Mercantile Exchange. It was the highest closing price since trading began in 1983. Futures surged to an all-time intraday high of $120.36 a barrel yesterday.
The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December, the Tempe, Ariz.-based group said yesterday. The report came after an oil pumping station was attacked in Nigeria.
The ISM report “probably gave us a little bit of a bounce psychologically,” said Phil Flynn, a commodities trader for Chicago-based Alaron Trading. “Maybe the demand for oil is going to rebound.”
U.S. demand for petroleum products, such as gasoline and diesel, fell 2.7 percent in the past year, Energy Department data shows, as slowing economic growth and higher-than-normal energy prices curtailed consumption. The decline has been countered by rising use in developing countries.
Demand in China, India, the Middle East and Russia “can grow more than we are currently shrinking,” said Roger Read, a Natixis Bleichroeder analyst in Houston. “You keep thinking that there’s got to be a point at which demand stops growing, but we haven’t reached it yet, at least not in dollar terms.”
— Bloomberg News