Oil prices hit new highs for the year Monday as investors geared up for the potential of more OPEC production cuts.
Benchmark crude for April delivery gained $2.01 to $47.53 a barrel on the New York Mercantile Exchange. Prices reached as high as $48.83 earlier in the day.
Oil has been ready for a recovery, and historically it's hard to find a 30-day window kinder to the market than about March 15 through April 15, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Gasoline prices are sure to follow that rough trajectory upward as the U.S. heads into driving season.
Kloza said prices seem to be heading toward the $50 threshold.
"It's almost like it's on a natural trajectory that should see it do that," he said. "That doesn't mean we've started a big bull market. It's just sort of we're in a window here for a typical recovery and a little bit of a spring rally."
The rally surged even as the dollar rebounded against other major currencies. Investors are prone to buy commodities like oil and gold as a protection against inflation and dollar weakness.
"It might indicate to a lot of folks that watch it that if it wasn't for the dollar, we might already be knocking on the door of $50," Kloza said.
The Organization of Petroleum Exporting Countries plans to meet Sunday in Vienna, and some of the group's leaders have said a production cut is likely.
Iranian Oil Minister Gholam Hossein Nozari was quoted by the official IRNA news agency Sunday saying OPEC members have "almost" completely complied with the 4.2 million barrels a day of output quota reductions announced since September.
Also on Monday, Iraq's oil minister said crude oil prices are not "profitable and fair" for oil producing countries and should be increased.
Hussain al-Shahristani, speaking to the private Sharqiyah television station, said OPEC members are working to control prices to "inch them up." He said Iraq will have to review its budget in mid-2009 if oil prices continue to stay below $50 per barrel.
After cutting production for months, it finally appeared last week that OPEC had regained its footing. Domestic producers are also slashing production and on Friday, Baker Hughes reported that the number of oil and gas rigs in North America fell for the seventh straight week.
That was two days after the government said that U.S. crude inventories fell for a second week in three, halting a trend over the previous six weeks that saw inventories jump more than 30 million barrels.
Some analysts expect OPEC to announce a cut of at least 500,000 barrels a day, though the group's biggest producer, Saudi Arabia, hasn't yet commented on the possibility of further output reductions.
Phil Flynn, an analyst at Alaron Trading Corp., said the market is giving OPEC its due respect by pricing in another production cut.
"But after that we will still need to see demand kick in to a level that will start eating into supply," Flynn wrote in his morning energy report.
Meanwhile, the national retail average price for a gallon of regular gas fell two-tenths of a cent to $1.945 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 3 cents a gallon above what it was a month ago, but $2.17 below last July when prices peaked at $4.11 per gallon.
Gas futures last week hit their highest point since just before Christmas, Kloza said, and it won't take much to push them over $2 a gallon.
Oil has traded near $40 a barrel since December after plummeting from $147 in July as crude demand fell amid the worst global recession in decades.
Oil investors often look to stock markets as a measure of sentiment on the overall economy, but crude has risen from below $35 a barrel last month despite the major U.S. equity indexes plunging to 12-year lows last week.
Oil rose Friday even as the Labor Department said America's unemployment rate rose to 8.1 percent in February, the highest since late 1983.
In London, Brent prices gained 42 cents to $45.27 on the ICE Futures exchange.
In other Nymex trading, gasoline for April delivery rose almost 3 cents to $1.36 a gallon, while heating oil gained nearly 3 cents to $1.258 a gallon. Natural gas for April delivery lost 2.1 cents to $3.924 per 1,000 cubic feet.
