NEW YORK -- The price of oil is nearing levels not seen since 1990 as the U.S. prepares for a potential war in Iraq at a time when crude supplies are extremely tight.
The March crude contract rose 20 cents Wednesday to finish the day at $37.16 per barrel, a new 29-month peak.
Oil futures on the New York Mercantile Exchange are just a nickel shy of closing at their highest level since Oct. 16, 1990. The highest settlement price since then was $37.20 on Sept. 20, 2000.
''People have to understand that we went into the beginning of this year with very low stocks,'' said Lawrence Goldstein, president of the New York-based Petroleum Industry Research Foundation. Since then, oil prices have jumped 19 percent -- a trend Goldstein and other oil analysts attribute to the increased likelihood of military action in Iraq.
The price of Alaska North Slope crude closed higher Wednesday in spot market trading in New York. Oil for delivery to the West Coast gained 19 cents, to close at $36.81 barrel.
Retail fuel prices have also soared. The average pump price of regular unleaded gasoline is now $1.66 per gallon, 54 cents higher than a year ago, according to Energy Department statistics. A gallon of diesel averages $1.70, or 55 cents higher than last year, according to the agency.
Oil traders have pushed prices higher out of supply concerns and fear that a war in Iraq could spur violence throughout the Middle East, leading to attacks against oil export facilities in Saudi Arabia or Kuwait. The short-term loss of Iraqi oil is less of a concern to U.S. markets, traders said.
Key U.S. imports of Venezuelan crude all but disappeared shortly after a nationwide strike began in December. As domestic supplies dwindled, many refiners lived hand-to-mouth, producing heating oil and gasoline with whatever oil they could find without keeping any in reserve.
The Venezuelan government is trying to rebuild its oil industry -- the only sector in the country still on strike -- but analysts estimate that exports to the United States are only about 1.5 million barrels per day, or roughly half of what they were before the strike started.
''Refiners don't have any excess sitting around and they've had to cut runs,'' said Ed Silliere, an analyst at Energy Merchant LLC in New York. ''This is normally the time of year when we build 3-4 million barrels of crude per week.''
Last week, the Department of Energy reported that commercial inventories of crude declined by 4.5 million barrels to 269.8 million barrels -- 52 million barrels below the year-ago level and the lowest level since 1975.
The agency, whose next report is scheduled for release Thursday morning, said nationwide supplies have dropped below the ''lower operational level,'' potentially hindering refinery operations.
On Wednesday, the wholesale price of gasoline climbed 0.77 cent to settle at $1 per gallon. Heating oil futures gained 3.39 cents to settle at $1.10 per gallon.
Saudi Arabia and other OPEC producers have signaled they would boost production to fill in the gaps, but analysts say those barrels have yet to show up in official supply data. Some analysts speculated that companies are hoarding oil supplies in the Caribbean and other locations just off U.S. shores in hopes of selling into the market at even higher prices if a war begins.
Assuming war brings no major supply disruptions in the Middle East and that Venezuelan output continues to rise, analysts anticipate a quick decline in crude prices. How far the price falls is a matter of debate. Some say $5, others $10 and the most bearish believe oil prices could settle at around $20 a barrel by spring.
Fadel Gheit, an analyst at Fahnestock & Co. in New York, expects Russian oil exports to increase in the coming weeks as winter comes to an end, bringing an extra 1 million barrels per day to the U.S. market. He's also confident that the Bush administration will not hesitate to release supplies from the Strategic Petroleum Reserve if the price of oil remains at these levels for an extended period of time.
''Fundamentally, there's nothing to keep it above $30,'' Gheit said.
On the International Petroleum Exchange Wednesday, April Brent crude closed 21 cents lower at $32.33 per barrel.
Natural gas for March delivery gained 22.3 cents to settle at $6.134 per 1,000 cubic feet.
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