Gasoline prices climbed and crude prices fell after another round of outages at U.S. refineries stoked supply concerns ahead of Memorial Day weekend, the unofficial start of the summer driving season.
Crude oil prices dropped, however, as traders figured that U.S. crude inventories, already abundant, are likely to swell even more if refineries keep paring back operations for maintenance.
Despite a ramp-up in gasoline production last week, the nation's gasoline inventories remain 6.9% below where they were last year, the Energy Department said Wednesday. Additional shutdowns are likely to boost roadside fuel prices further into record territory, analysts said.
The average U.S. retail price of unleaded, regular gasoline Thursday was at an all-time high of $3.227 a gallon, according to AAA.
Prices would have to surpass $3.29 a gallon to beat the inflation-adjusted peak reached in March 1981, the Energy Department said. With gasoline inventories at low levels not seen in nearly 50 years, according to James Cordier, president of Liberty Trading Group in Tampa, Fla., it seems likely that prices will pass that level.
'We could hit $3.75 this year,' Cordier said, noting that there's no telling when U.S. refineries will stop shutting down for maintenance. 'There's incentive to maintain what we have, but there's no incentive to make new refineries. No one wants refineries to go down, but the lack of any new refineries is the story.'
The refinery outages -- at Valero Energy's McKee refinery in Sunray, Texas and ConocoPhillips' Alliance oil refinery in Belle Chasse, La. -- followed the government's Wednesday report that showed a rebound in gasoline inventories and refinery utilization. The news was positive, but not enough to dampen prices.
'It's difficult to define to a precise inventory level where everyone brushes their hands together and says, that's it, the shortage is over. As a result, it's an ongoing battle in the marketplace,' said Tim Evans, energy analyst at Citigroup Global Markets.
Gasoline futures for June delivery rose 4.65 cents to settle at $2.3569 a gallon on the New York Mercantile Exchange.
Crude futures for July fell $1.59 to settle at $64.18 a barrel. Last week, crude imports averaged 10.9 million barrels a day, up 560,000 barrels a day from the previous week, the Energy Department said Wednesday.
Brent crude futures , which are traded on London's ICE futures exchange, rose 15 cents to settle at $70.72 a barrel. They had initially spiked to a nine-month high of $71.80 after news that Iran, a major oil producer, has expanded its uranium enrichment program, and that the U.S. Navy is holding unannounced exercises off Iran's coast.
Traders and analysts fear any conflict with Iran could result in the closure of the Strait of Hormuz, through which tankers ship about 17 million barrels of crude oil a day, according to the U.S. Energy Information Administration.
Also keeping Brent crude prices high is political tension in Nigeria. Oil worker unions started striking at Nigeria's state-owned oil company Thursday, and meanwhile, five gunmen kidnapped a Polish worker. It was the latest kidnapping in this year's spate of more than 100 seizures of foreign workers in Africa's largest oil producing nation.
In other Nymex trading, June heating oil futures fell 0.32 cent to settle at $1.9291 a gallon, while natural gas prices fell 7.6 cents to settle at $7.681 per 1,000 cubic feet.
The U.S. government reported Thursday that natural gas inventories expanded by 104 billion cubic feet last week to 1.95 trillion cubic feet for the week ending May 18. The level was nearly 21% above the five-year average of 1.61 trillion cubic feet in underground storage, but below last year's storage level of 2.15 trillion cubic feet.