Transcripts

Oil Reaches A New Record High

SUSIE GHARIB: Oil prices spiked to a record $143 a barrel today on fresh concerns about supply. In New York trading, August crude futures surged $2.60 to settle at $143.57 a barrel after topping $144 earlier in the day. The government reported U.S. crude stockpiles fell by two million barrels last week, putting inventories below 300 million barrels for the first time since January. As Suzanne Pratt reports, the drop in inventories comes at a bad time for drivers.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For those Americans who hit the road this holiday weekend, filling up their gas tanks will not be pretty. According to AAA, the national average for unleaded gas is now $4.09 a gallon. That's nearly a 40 percent jump from a year ago. In some areas of the country, drivers are paying closer to $5 a gallon. Still, those sky-high prices are having some effect on driving habits. Government data out today shows U.S. gasoline demand over the last four weeks is down 1.7 percent from a year ago. But oil expert Jonathan Kleisner says the drop in U.S. consumption is not affecting energy prices because global demand remains so strong.

JONATHAN KLEISNER, OIL ANALYST, REX CAPITAL GROUP: From a global standpoint, you have the Beijing Olympics, you have a lot of rebuilding going on there. You have an explosion in places like Russia and Brazil that are still growing very, very rapidly. I think that just sops up whatever demand slackens in the United States.

PRATT: On the other side of the supply-demand equation, global oil supplies are expected to remain under pressure. On top of that, geopolitical concerns are heating up as the saber-rattling between Israel and Iran continues to escalate. Experts say a clash between the two nations would fuel a big spike in oil prices.

KLEISNER: An amount of risk premium is already built in for a conflict like that. But, depending on its length and severity, will be how big the spike would be, looking around $170 a barrel if a full-blown conflict develops.

PRATT: In the absence of major geopolitical tensions, experts predict crude oil prices will top $150 a barrel before Labor Day. As a result, oil trader Mark Solazzo sees little relief for Americans this summer from the pain at the pump.

MARK SOLAZZO, OIL TRADER, M. SOLAZZO TRADING: The market's had plenty of opportunities to sell off. And every time there's any type of a little sell-off, the market recovers and moves on to make a higher high, which is very bullish -- in a trading standpoint, is a very bullish move.

PRATT: Tomorrow, the European central bank is expected to hike interest rates. If that happens, experts say it would hurt the dollar, which in turn, is likely to mean another boost for oil prices. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York