Published: Saturday May 9, 2009 MYT 7:18:00 AM
Updated: Saturday May 9, 2009 MYT 7:31:00 AM

Oil prices on the rise, crude ends week strong

NEW YORK: Oil prices appeared headed for the strongest week so far this year on better-than-expected unemployment numbers and what some experts believe may be overly optimistic expectations about the country's appetite for energy.

Retail gasoline prices, which had lingered around $2 per for weeks, climbed for the eighth straight day.

Benchmark crude for June delivery rose $1.92 to settle at $58.63 a barrel, its top closing price this year on the New York Mercantile Exchange.

In London, Brent prices rose $1.67 to settle at $58.14 a barrel on the ICE Futures exchange.

Pump prices increased 2.8 cents overnight to a new national average of $2.169 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

Gas costs 12.2 cents more per a gallon than last month, but it's $1.476 a gallon cheaper than a year ago.

Outside of the summer driving season, however, experts say it's hard to justify the wave of optimism that's been driving up energy prices.

"People are cherry picking the numbers right now because they're looking for good news," said Michael Lynch, president of Strategic Energy & Economic Research.

"You usually don't see a bubble re-inflate like this. The market has gotten ahead of itself."

It's been less than a year since oil prices neared a staggering $150 per barrel and retail gasoline hit a national average above $4.

But energy prices crashed after July, and crude was trading at five-year lows just two months ago.

The government continued to issue reports this week that influenced energy prices, but in which direction depended largely on how the data was interpreted.

For example, the Energy Information Administration said the nation's oil surplus grew less than expected, which is typically gives energy prices a boost. But levels rose nonetheless, meaning storage houses were bloated with more crude than has been seen in nearly 19 years.

Growing levels of unused crude in most cases would drive energy prices down.

In addition, the government said refineries have cranked up operations a bit more.

But it also said American petroleum consumption has dropped to its lowest level in a decade.

Then on Friday, the U.S. Labor Department said that employers cut 539,000 jobs in April.

That was less than expected and the smallest reduction in six months.

However, the nation's unemployment rate climbed to 8.9 percent, the highest since late 1983.

Elsewhere, mortgage finance company Fannie Mae said it will need $19 billion in additional government aid as it struggles with the meltdown in the housing market.

Fannie Mae said Friday it posted a first-quarter loss of $23.2 billion. Toyota Motor Corp. also reported it lost $7.7 billion in the January-March quarter, a bigger quarterly loss than General Motors'.

For most, a sustained rise in energy prices seems hard to justify.

"There's shock and disbelief that oil and gas can defy the normal historical reactions to supply and demand," analyst Phil Flynn said in a client note.

"Traders are calling me and are stunned with no idea of what is happening."

Ever since crude prices started falling last year, OPEC has tried to prop up prices by cutting oil production.

Ministers are expected to meet later this month to decide whether to call for a fresh round of cuts.

The group, which produces about 40 percent of the world's oil, has been working toward a cut of 4.2 million barrels a day.

Tanker tracker Oil Movements said that oil exports should drop another 130,000 barrels a day during a four-week period that ends May 23, only a modest decline for the month, it said.

In the U.S., oil exploration has dwindled as crude prices slumped well below last year's highs.

Houston-based Baker Hughes Inc. reported Friday that the number of rigs actively exploring for oil and natural gas fell by 17 this week to 928, down nearly half from a year ago.

In other Nymex trading, gasoline for June delivery rose 4 cents to settle at $1.7055 a gallon and heating oil gained 3.32 cents to settle at $1.5184 a gallon.

Natural gas for June delivery jumped 23 cents to settle at $4.311 per 1,000 cubic feet.

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