Oil Prices Could be Reaching Peak

by : Glady Reign

Oil prices continue to creep upward and analysts in the industry predict they will peak soon, depending upon geopolitical developments.

In Long Island, regular unleaded gasoline averaged $2.812. According to the survey conducted by the American Automobile Association (AAA), the figure was the highest since Sept. 12. Prices normally rise as winter ends and driving increases, but analysts are saying this year's hike came earlier than the usual.

The problem is far complicated than mere enhancements of and other car parts accessories like. Automotive experts and federal energy officials have faulted downtime for maintenance at some refineries in the United States and Europe. The refineries are the sources of some of the gasoline consumed in the mentioned territories. Additionally, some experts believe that relatively inexpensive gasoline during winter combined with minimal snowfall in many parts of the country to keep demand unusually high for that time of year.

But the U.S. Energy Department has this to say: "Once refineries return from maintenance and imports increase, supplies appear to be sufficient to keep the national average retail price this spring below last spring's peak level, absent any major unanticipated supply disruptions."

James Ritterbusch, the president of Ritterbusch & Associates in Galena, Ill., an oil trading advisory firm, said that refineries are ramping up production now and prices probably will level off in about two weeks. "We'll probably peak earlier this year than we often do, in April," he added.

What happens then depends on geopolitics, he said, especially a resolution of tensions over Iran's seizure of 15 British sailors and marines on Friday, allegedly in Iranian waters. "If this situation in Iran heats up further, we're not going to get a sizable price decline, if any," Ritterbusch said.

Benchmark crude prices inched up Wednesday as traders awaited the weekly U.S. inventory report. Traders expected a decline in gasoline stocks and an increase in crude oil supplies. Nonetheless, the contrary happened. The situation renewed concern about Iran, the world's fourth biggest crude producer. Continued uncertainties over Iran's nuclear program and below-normal temperatures in the northeastern and central United States are keeping prices from plummeting.

Iran announced last Monday that it has begun enriching uranium on an industrial scale. President Mahmoud Ahmadinejad said that the country was now capable of enriching nuclear fuel using 3,000 centrifuges.

Light, sweet crude for May delivery increased seven cents to $61.96 a barrel by noon in Europe in electronic trading on the New York Mercantile Exchange. In addition, May Brent crude rose 32 cents to $67.74 per barrel on London's ICE Futures exchange.

Prices have been volatile the last couple of weeks, gaining nearly $5 a barrel after Iran detained 15 British sailors and marines, dropping on their release last Thursday, and then sliding almost $3 on Monday on expectations of oversupply at a key North American delivery point.

According to the survey of Dow Jones Newswires, analysts expect gasoline inventories to have declined by an average of 1.3 million barrels in the previous week. Analysts are also calling for a 900,000 barrel cut in distillate stockpiles and a build of 1.6 million barrels in crude oil supplies. Stockpiles include diesel fuel and heating oil.

Some experts and some world powers questioned the affirmation. But it just added to tensions which receded after Iran released the British sailors and marines it had held for 13 days for allegedly entering its waters.