Escalating tensions in Iraq spilled over to energy markets for a second day Friday, pushing crude oil prices to ten-month highs and setting the stage for stubbornly high gasoline prices in the U.S. to rise even further.
After jumping over $2 on Thursday, the benchmark U.S. oil contract for July delivery was up 15 cents to $106.68 a barrel in electronic trading on the New York Mercantile Exchange. It had earlier hit a high of $107.68.
Brent crude, a benchmark for international oils, was up 54 cents to $112.96 a barrel on the ICE Futures exchange in London.
The jumps are likely to drive the price of regular unleaded gasoline now about $3.64 a gallon up 5 to 10 cents in the coming days and keep summer prices elevated, says Tom Kloza, senior energy analyst at gasbuddy.com.
'We're not looking at a Gas-zilla event; it'll probably be a slow drift higher rather than skyrocketing,'' he says.
Iraqi oil production has already been cut by about 10%, or about 300,000 barrels a day, since March.
'The question is, who is going to fill the gap? Saudi Arabia? That's what the market is looking at,'' says John Kingston, global news director for industry tracker Platts Energy.
Gasoline averaged $3.58 a gallon between Memorial Day and Labor Day last year. But retail prices have averaged about $3.65 for the past month unlike 2011, 2012 and 2013, when prices plateaued weeks ahead of peak summer driving season. This year, higher demand, lower-than-expected supplies and declining production propped up crude oil prices before militants escalated their attacks.
Oil's price rise grounded airline and other fuel-dependent transportation stocks Thursday. Among them: United Continental Holdings, down 6% to $42.60; American Airlines, down 5% to $40.20; Delta, down 5% to $38.50; and JetBlue, down 5% to $9.94. Federal Express eased 2.5% to $139.21.