Oil price jumps above $112

Oil prices jumped above $112 a barrel on Thursday to near the highest level since 2008 amid signs U.S. demand remains robust despite rising fuel costs.

Benchmark crude for June delivery was up 62 cents at $112.07 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange.

In London, Brent crude for June delivery was up 67 cents to $124.53 a barrel on the ICE Futures exchange.

Benchmark oil surged $3.17 to settle at $111.45 on Wednesday as falling U.S. crude and products supplies suggested a two-month rally hasn’t deterred consumer spending.

The Energy Information Administration reported that U.S. oil supplies shrank by 2.3 million barrels last week while analysts had expected an increase of 1.6 million barrels. The EIA said inventories of gasoline and distillates also fell.

Oil is up about 33 per cent since mid-February and reached $113.46 during trading on April 11, the highest since September 2008.

Better than expected U.S. housing sales last month, a weakening dollar and a 1.5 per cent jump by the Dow Jones industrial average also helped push oil prices higher Wednesday.

Improving economic data from developed countries and investor concern crude supplies could be disrupted in the Middle East and North Africa should keep oil prices well above $100 this year, said Ben Westmore, an energy analyst with National Australia Bank.

“The risk premium currently factored into oil prices is expected to persist through 2011,” Westmore said. He expects benchmark crude to average $116 in the fourth quarter.

Other analysts say global economic growth will likely slow during the rest of the year, bringing down crude demand and oil prices. Captial Economics is forecasting Brent crude to drop to $75 during 2012.

“Global demand growth is set to slow and the risk premium currently in the price due to events in Libya will dissipate,” Capital Economics said.

In other Nymex trading in May contracts, heating oil was flat at $3.22 a gallon and gasoline gained 1 cent at $3.29 a gallon. Natural gas futures were up 3 cents at $4.34 per 1,000 cubic feet.