Oil jumps over $123

NEW YORK Light, sweet crude for June delivery hit a new record of $123.56 in afternoon trading on the New York Mercantile Exchange before retreating slightly to trade up $1.32 at $123.16 a barrel.

The department's Energy Information Administration said in a weekly report that distillate fuels, which include diesel and heating oil, fell unexpectedly while gasoline demand rose slightly last week. Traders chose to focus on those numbers and shrug off crude inventories, which rose much more than analysts predicted, and gasoline supplies, which increased when analysts forecast a decline.

"We've got heating oil pulling up the complex," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

June heating oil futures rose 7.85 cents to $3.432 a gallon after earlier rising to a new trading record of $3.4386.

Earlier, oil prices waffled as traders were torn between relief that crude and gasoline supplies are rising vs. worries about rising demand and falling distillate stockpiles. But the fact that prices didn't decline sharply signaled to some investors that the market was poised to rally, analysts said.

"It shows you that this market ... at times just ignores bearish news," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Oil prices didn't react to the dollar, either, after it strengthened against the euro.

The dollar's protracted decline against the euro and other foreign currencies has played a major role in oil's rise by attracting investors looking for a hedge against inflation. When the dollar reverses course and strengthens, the effect usually reverses, sending oil prices lower.

At the pump, meanwhile, the average national price of a gallon of regular gas rose Wednesday for the first time since last week, adding 0.8 cent to $3.618, according to a survey of stations by AAA and the Oil Price Information Service. Gas prices are back within a cent of the record $3.623 a gallon set last week, and are expected to rise to an average of $3.73 a gallon next month, according to the latest Energy Department forecast.

Some analysts predict prices could rise to a national average of $4 in coming weeks; prices are already that high in some areas, including parts of Hawaii and California.

Diesel fuel also rose Wednesday, adding half a cent to a national average of $4.242 a gallon, within a penny of the record of $4.251 set May 1. While high gas prices are hitting consumers at the pump, high diesel prices are hurting them in grocery and retail stores.

"We must pass some of these costs through to our customers, which ultimately translate(s) into higher prices on the store shelves," said Mike Card, president of trucking firm Combined Transport Inc., of Central Point, Ore., in Senate testimony on Wednesday.

Gas prices tend to lag the futures market, and fell slightly in recent days due to a nearly $10 decline in oil prices last week. But crude futures have rebounded sharply since then, and gas prices are responding by also rising. Analysts and the EIA expect gas prices to decline over the summer after peaking in late May or June; that's the pattern gas prices follow most years. Of course, this is anything but a normal year - crude oil prices have nearly doubled in the past 12 months.

"All bets are off if oil keeps going up," Flynn said. "Gas prices could keep rising."

In other Nymex trading Wednesday, June gasoline futures rose 1.38 cents to $3.1193 a gallon, while June natural gas futures rose 19 cents to $11.34 per 1,000 cubic feet.

In London, June Brent crude futures rose $1.80 cents to $122.11 a barrel on the ICE Futures exchange.