Oil added to gains to go above $108 a barrel Monday, underpinned by three weeks of declining U.S. stockpiles and a rush of speculative money into the crude futures market.
By early afternoon in Europe, benchmark crude for September delivery was up 40 cents to $108.27 a barrel in electronic trading on the New York Mercantile Exchange. The expiring August contract closed up 1 cent at $108.05 on Friday after trading as high as $109.32 earlier in the day.
American motorists, meanwhile, are bracing for further increases in gas pump prices this summer after average national prices rose 12 cents in the past week alone.
Sharp falls in U.S. inventories of crude oil have contributed to a 15 percent jump in the Nymex benchmark, also known as West Texas Intermediate crude, since June 21. Some analysts, however, say the fundamental rules of supply and demand alone do not justify the rise and say speculators are also pushing the price higher.
"While crude oil stocks have declined for three weeks in a row, fundamentals in the gasoline and distillates markets appear less supportive," said a report from JBC Energy in Vienna. "Stock levels for oil products are in line or above the 5-year average and domestic demand is anything but impressive."
Energy analysts at The Schork Group Inc. said open interest, which is the number of open futures contracts, is at record levels as is the participation of Wall Street hedge funds and investors such as commodity pool operators. They said in a report that Wall Street now owns six times as many barrels of oil in the WTI futures market as there are sitting at the Nymex oil delivery terminal in Cushing, Oklahoma.
Oil prices were also supported by a weaker dollar, which makes crude and other commodities priced in the U.S. currency cheaper for traders using other currencies. On Monday, the euro was up at $1.3169 from $1.3138 on Friday.
Benchmark oil's jump has been so sharp that is has closed most of its discount to Brent crude, which is traded on the ICE Futures exchange in London. September Brent was up 23 cents to $108.30 a barrel.
In other energy futures trading on the Nymex:
— Wholesale gasoline lost 0.07 cents to $3.0511 a gallon.
— Heating oil rose 0.79 cent to $3.0973 a gallon.
— Natural gas retreated 7.5 cents to $3.714 per 1,000 cubic feet.