By JOHN PORRETTO
AP Energy Writer
HOUSTON (AP) — While crude settled above $70 a barrel for the first time this year, gasoline prices failed to rise overnight for the first time in 42 days, signaling a possible break for motorists as summer driving shifts into high gear.
Benchmark crude for July delivery rose $1.92 to close at $70.01 a barrel in trading on the New York Mercantile Exchange, hitting a new annual high of $70.18 during the afternoon. Prices continued to rise in electronic trading after the market closed.
On Tuesday, the government joined several banks that have revised their price expectations upward for the year. The Energy Department also raised its full-year price outlook for gasoline.
The pace at which gasoline prices spiked throughout May caught many forecasters off guard. Still, compared with last summer, gasoline is a bargain.
This week last year, gas crossed the $4 barrier for the first time during crude’s historic run toward $150 a barrel.
On Tuesday, the average national retail price flattened at $2.619, according to auto club AAA, Wright Express and the Oil Price Information Service. That marked the first time since April 28 prices haven’t risen overnight.
In the past month alone, gas prices have jumped more than 40 cents a gallon.
Many factors can influence the price of gasoline, including demand and where oil used to make it comes from. Over the past couple of weeks, refiners that have slowed down to match anemic demand from consumers have begun to crank up production for the summer.
Fred Rozell, retail pricing director at the Oil Price Information Service, said part of the run-up in overall prices can be linked to signs of a stabilizing economy, but there’s no ignoring that fuel demand remains weak. Demand fell again at the end of May, according to the Energy Department.
“We probably had a mini-bubble here and, like all bubbles, they tend to go beyond what they should,” Rozell said. “That doesn’t mean prices won’t start marching up again this week, but a lot of people are scratching their heads about why we’ve seen prices run up as much as they have.”
The Energy Department’s Energy Information Administration said Tuesday it expects retail gasoline prices to hit their summer peak in July, with a monthly average near $2.70 a gallon. For the full year, the EIA now predicts an average retail price of $2.33 a gallon, up from its forecast of $2.12 a month ago.
In a monthly report, the EIA also said crude prices will likely average $67 a barrel in the second half of 2009, about $16 higher than the first six months of the year. A month ago, the EIA’s price-per-barrel forecast for the second half of 2009 was $55.
But making an accurate forecast in this climate of volatility is extremely difficult. The same banks that have upped their predictions in recent weeks were wildly wrong last year, as was the government, and failed to see the collapse of the oil bubble.
Crude prices are rising because of an influx of money from Wall Street. Investors have used oil and other commodities as a hedge against a weak dollar. The dollar has fallen in large part because of the billions the government has spent on corporate bailouts, and that has attracted enormous sums of money to the oil markets.
Fundamentally, however, most experts do not see justification for $70 oil.
The dollar, which fell further Tuesday against the pound and the euro, “seems to be driving the price of oil again,” said Phil Flynn, an analyst at Alaron Trading Corp.
Just how long a weak dollar can support prices, with the economy still in recession, is questionable. Crude in storage remains near record highs and demand in the U.S., the world’s largest consumer of oil, is sluggish.
There are signs the global economy is improving. China’s passenger car sales shot up nearly 47 percent in May from a year earlier, buoyed by tax cuts and other government incentives, the China Association of Automobile Manufacturers reported Tuesday.
The Energy Department also said that after falling by nearly 2 million barrels per day this year, global consumption of oil will begin to rebound in 2010 as the economy recovers.
Wednesday’s release of petroleum inventory data from the Energy Information Administration could provide additional insight about crude demand. Analysts expect a rise of 800,000 barrels.
These days, “it’s just a market that goes up easier than it goes down,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “It’s the opposite of a few months ago when oil seemed to fall on any kind of news,” he said.
In other Nymex trading, gasoline for July delivery rose 3.07 cents to settle at $1.9667 a gallon and heating oil rose 3.99 cents to settle at $1.8076. Natural gas for July delivery settled flat at $3.731 per 1,000 cubic feet.
In London, Brent prices gained $1.74 to settle at $69.62 a barrel on the ICE Futures exchange.
Associated Press writers Mark Williams in Columbus, Ohio, Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.
By JOHN PORRETTO