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Gasoline Sets More Records, with Prices Likely to Go Higher

Gasoline prices hit new records at the pump again Thursday, while gas and oil futures traded higher on continued concerns that refiners aren't making enough gasoline to meet peak summer driving demand.

With the summer driving season set to begin on Memorial Day weekend, in just over a week, the 1.7 million-barrel increase in gasoline inventories reported by the government on Wednesday simply wasn't enough to convince energy traders that supplies are catching up to demand.

And that means retail gasoline prices are likely to continue rising for at least another month, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

"We might have to wait until post-Fourth of July," to see a significant decline in gasoline prices, Ritterbusch said.

The average national price of regular gasoline rose to an all-time high of $3.114 a gallon on Thursday, according to AAA and the Oil Price Information Service. That's up 1.1 cents overnight, and almost 25 cents in a month.

Gasoline futures for June delivery rose 5.34 cents to $2.3904 in midday trading on the New York Mercantile Exchange. Light, sweet crude for June delivery was up 91 cents at $63.46 a barrel on the Nymex.

Heating oil futures rose 3.94 cents to $1.9064 a gallon. Natural gas prices jumped 11.6 cents to $8.006 per 1,000 cubic feet after the Energy Information Administration reported a slightly lower-than-expected increase in inventories.

Brent crude for July delivery rose $1.30 to $69.27 a barrel on the ICE Futures exchange in London.

Oil prices also got some support on Thursday from comments by a top OPEC leader that the oil cartel will not pump more crude to meet an expected surge in summer demand. But analysts said traders were more focused on the tight gasoline market.

"It's still 99% gasoline-led," Ritterbusch said. "We're still not building gasoline supplies enough."

The Energy Information Administration reported Wednesday that gasoline stocks, while increasing to 195.2 million barrels, remained well below the average for this time of year.

"Those were insignificant figures," wrote Cameron Hanover analyst Peter Beutel in a research note.

Crude oil supplies rose by 1 million barrels last week to 342.2 million barrels.

"Crude may very well become a sideshow to gasoline as we enter the critical spring and summer months," wrote Man Financial analyst Edward Meir in a research note.

The gasoline shortage is due to a number of unexpected refinery outages this spring, and continued strong consumer demand -- despite rising prices.

"Gasoline demand remains quite strong," said Antoine Halff, an analyst at Fimat USA.

Every day's news seems to bring a new list of refinery problems, and Thursday was no exception. BP, ConocoPhillips and Valero Energy all reported planned or unexpected shutdowns at a number of U.S. refineries, Barclays Capital analysts said in a research note.

Not helping matters were comments by OPEC Secretary General Abdalla Salem El-Badri on Thursday in Bali, Indonesia, that the 12-member oil cartel will stand firm on its view that global oil markets are amply supplied and do not need an increase before the summer.

El-Badri said U.S. gasoline stock levels are "acceptable" despite the industry's concern that inventories have fallen too low to meet the usual surge in summer demand.

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