NEW YORK — Oil futures prices surged by a dollar a barrel to break the $17 level Monday, continuing a rally that has sent prices soaring by nearly $4 a barrel in less than three weeks.
Analysts said the explosive rally was fueled by strong U.S. demand for high-quality crude oil used to make gasoline and by a report that some non-OPEC members were willing to cut production by about 700,000 barrels a day to help the cartel stabilize oil prices.
On the New York Mercantile Exchange, contracts for June delivery of West Texas Intermediate, the benchmark U.S. crude, closed at $17.16 per 42-gallon barrel, up $1 from Friday's close. It was the first time since Feb. 7 that the near-month contract traded for more than $17, while Friday's close was the first time since Feb. 14 that oil had sold for more than $16.
Prices had been hovering mainly between $11 and $14 per barrel in March and April before picking up earlier this month.
Price Decline 'a Little Overdone'
June contracts for refined products also showed strong gains. Unleaded and regular gasoline both were up more than 1 cent over Friday's closing prices--unleaded at 55.75 cents a gallon, compared to 54.38 cents, and regular at 55.76 cents a gallon, up from Friday's 54.41 cents.
"There seems to be a collective realization by the oil industry that perhaps the drop in prices on the Merc from $31.81 a barrel on Nov. 20 to $9.75 on April 1 was a little overdone," said Peter Beutel, an analyst at Rudolff Wolff Futures in New York. "Oil prices may belong somewhere in the middle."
Madison Galbraith, senior energy specialist at Merrill Lynch Energy Futures, said there was a lot of refinery buying in the crude market.
"People can make up a lot of reasons. But what it comes down to is they haven't bought it, they need it and they're going to buy it," he said.
Gasoline demand has picked up over the last two months as dealers prepare for the Memorial Day opening of the summer driving season. Since the week ending March 21, refineries have increased their demand for crude by 1.45 million barrels a day, creating the highest level of refinery runs of crude into products since Aug. 28, 1981, Beutel said.
At the same time, he said, there have been short supplies of the lightweight grades of crude used to make gasoline and other distillates such as jet fuel and heating oil. Two widely used light crude grades are West Texas Intermediate and Brent crude from the North Sea.
Many Norwegian and British rigs have been closed for annual maintenance. At the same time, refiners still are feeling the impact of the strike that shut down Norway's rigs last month.