Oil, Gasoline Climb to Records as Investors Move to Commodities

Crude oil and gasoline rose to records as investors purchased commodities because their returns have outpaced stocks, bonds and other financial instruments.

Oil climbed to $113.93 a barrel in New York, the highest since futures began trading in 1983. Rising global demand for raw materials and a weakening dollar have led to record prices this year for commodities including corn, rice and gold. China said today diesel imports surged 49 percent in March.

Developing countries are still growing, which is boosting demand for metals, grains and energy, said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. It makes sense for investors and hedge funds to invest in these commodities with the weakness of other markets.

Crude oil for May delivery rose $1.80, or 1.6 percent, to $113.56 a barrel at 11:42 a.m. on the New York Mercantile Exchange.

Gasoline for May delivery climbed 3.9 cents, or 1.4 percent, to $2.8608 a gallon in New York. Futures touched $2.8715 today, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

U.S. pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 1.3 cents to a record $3.3386 a gallon, AAA, the nation's largest motorist organization, said today on its Web site.

Oil has risen 39 percent and the dollar has dropped 12 percent against the euro since the Federal Reserve began lowering interest rates on Sept. 18.

`Attractive' Investment

This is where the funds want to be, said Daniel Flynn, a broker with Alaron Trading Corp. in Chicago. Rate cuts and a weak stock market make commodities very attractive.

The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 0.9 percent to 1503.347 today. It's up 35 percent from a year ago.

Oil in New York surged 79 percent over the past year as the Standard & Poor's 500 Index dropped 9.8 percent and the Dow Jones Industrial Average declined 3.5 percent.

It doesn't look like there's anything to get in the way of the oil market, said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. As long as the dollar goes lower, more money will go into commodities.

Exxon Mobil Corp. and Chevron Corp. led energy shares to the highest level since January because of rising oil and gasoline prices. Exxon, the biggest U.S. oil company, climbed 26 cents to $89.96. Chevron, the country's second biggest, added 24 cents to $89.54.

Demand Growth

The Organization of Petroleum Exporting Countries left its forecast for 2008 oil demand at 86.97 million barrels a day, a 1.2 million barrel-a-day gain over 2007, according to the group's monthly demand report today. OPEC's 13 members produce more than 40 percent of the world's oil.

China, the world's second-largest energy consumer, increased diesel imports as state refiners China Petroleum & Chemical Corp. and PetroChina Co. bought more to ensure supplies for the spring planting season.

Chinese oil demand this year will rise 4.7 percent to 7.9 million barrels a day, the International Energy Agency said in a report on April 11.

Brent crude for May settlement rose $1.73, or 1.6 percent, to $111.57 a barrel on London's ICE Futures Europe exchange. The contract touched a record $112.08 a barrel.

Petroleos Mexicanos, the third-largest supplier of crude oil to the U.S., reopened two of its oil-export terminals on the Gulf of Mexico after closing them April 13 because of heavy winds and rain. The terminals at the ports of Pajaritos and Cayo Arcas opened this morning, said Martha Avelar, a spokeswoman for Mexico City-based Pemex, as the company is known.

The Pacific port of Salina Cruz and the Gulf port of Dos Bocas are still closed, Avelar said.