Updated from 1:53 p.m. EST
First $56 a barrel, then $57 a barrel. There's barely time for the ink to dry in the record book before crude oil prices require a new entry.
Based on preliminary data, the April futures contract closed up another 24 cents Thursday at $56.70 a barrel in Nymex floor trading, having traded as high as $57.60 earlier in the day, after the benchmark U.S. crude surpassed the October 2004 record high Wednesday.
Prices surged yesterday on bullish Energy Department data that proved more influential than OPEC's decision to raise production by 500,000 barrels a day. Weekly inventory figures for the most recent week showed declines in gasoline and distillates, which include heating oil.
Until recently, the market's main focus was heating oil because of an unusually long period of unseasonably cold weather in parts of the U.S., a situation that inflated demand at a time when supplies are normally allowed to shrink.
A surprise decline in gasoline inventories also captured traders' attention at a time when refineries are beginning to refocus operations on gasoline to build up supplies ahead of the peak summer driving season. Inventories fell by 2.9 million barrels, even though the consensus forecast called for an increase of 800,000 barrels.
The latest leg of the 2005 rally made something of a mockery of OPEC's decision to raise its official production ceiling April 1. That will increase the ceiling to 27.5 million barrels a day, a figure that fails to reflect systemic cheating on individual quotas. The cartel formerly cut production by a million barrels a day, effective Jan. 1, having boosted production three times by a total of 2.5 million barrels a day in the second half of last year as prices marched irrevocably higher. Saudi Arabia was instrumental in pushing through those output increases.
Prior to yesterday's rally, OPEC said it was prepared to increase output again, if necessary. That may very well be the case, but sooner than the cartel expected.
The 2005 rally comes after a steep two-month correction from October's then-record levels. Prices at one point fell almost 25%, flirting with the $40-a-barrel level. At this time last year, oil was trading around $38 a barrel before embarking on a year-long ascent.
One difference between the 2004 and 2005 rallies is that last year the market was perpetually concerned about supply disruptions -- actual or potential -- mainly in Iraq and Russia.