The benchmark contract for crude futures closed at a record Monday, near $64 a barrel for the first time ever as the closure of a U.S. embassy in Saudi Arabia sparked concerns that more trouble may be brewing in the oil-rich Middle East.
According to CBS MarketWatch, the closing of the U.S. embassy in Saudi Arabia fueled a climb in crude because “threats remind the market that maybe a pipeline is on the list of thing to attack in the future,” said James Williams, an economist at WTRG Economics.
Crude for September delivery traded as high as $64 a barrel on the New York Mercantile Exchange. It closed at $63.94, up $1.63, or 2.6%.
On Sunday, the U.S. embassy in Riyadh said it was closing until Wednesday amid an unspecified security threat.
The gains in oil are “tied to a ‘heightened state of alert’ as opposed to an actual supply shortage,” said Tim Evans, a senior analyst at IFR Markets.
“This gives the markets an opportunity to blast to new highs in the near term, although the ongoing flow of ample production means that a major downside risk for this market remains,” he said in a note to clients.
At the same time, “Iran’s resumption of nuclear fuel conversion” added to the strength in oil, said John Kilduff, an analyst at Fimat USA.
“The situation surrounding Iran bears close watching,” he said in a research note, adding that “Iran’s rejection of the latest incentives offered by the EU to cease its nuclear program was expected in most quarters.”
Record prices for crude helped send gasoline prices at the futures and retail levels to all-time highs as well.
September unleaded gasoline was up 3.78 cents at $1.87 a gallon after trading as high as $1.873 – the highest price ever for a benchmark contract. Prices surpassed the $1.86 record seen on July 8 in the August contract.
At the retail level, the average price for a gallon of regular unleaded stood at $2.339, the highest level ever recorded, according to AAA’s Daily Fuel Gauge Report.
“Retail gasoline and diesel prices have surged to new record levels this morning, and it is no longer unusual to see $3-a-gallon pump postings in some western markets,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.