Oil closes above $80 a barrel; Humberto rattles traders

NEW YORK — Oil prices finished above $80 a barrel for the first time Thursday and gasoline prices rose as refiners reported production problems after Hurricane Humberto hit Texas.

Oil first traded over $80 a barrel Wednesday after the Energy Department reported drops in inventories and refinery activity, but it ended the day below that psychologically important mark.

Thursday, however, the October contract for light, sweet crude finished at a record $80.09, up 18 cents on the New York Mercantile Exchange and above the previous record close that was set a day earlier of $79.91.

Despite the gains, oil is still well below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.

Humberto added to the supply concerns by cutting power to several refineries in the Port Arthur, Texas, area Thursday. The hurricane later lost strength and was downgraded to a tropical storm.

Another tropical system gaining strength in the Atlantic also supported prices.

Shuttered refineries included Valero's 325,000 barrel-per-day facility, Total's 180,000 barrel-per-day plant and Motiva's refinery, which can process 285,000 barrels a day.

Exxon Mobil said its 350,000 barrel-per-day Beaumont, Texas, refinery suffered a minor outage but remained up and running.

Traders appear more concerned about the Atlantic storm, which the National Hurricane Center is calling Tropical Depression Eight. While the storm's course remains unclear, energy investors get worried any time weather threatens key oil and gas infrastructure in the Gulf of Mexico.

In addition to closing at a record high, the October oil contract also set an intraday record of $80.20 a barrel Thursday, 2 cents above the previous high set Wednesday.

Oil's run-up has come despite OPEC's decision Tuesday to boost output by 500,000 barrels, a move driven in part by concerns that high oil prices are hurting the global economy.

Many analysts are perplexed by the high prices, arguing levels have been driven up by a flood of speculative buying. Many believe demand does not support such high prices.

"The world economy in the last few years has shown to be quite resilient to strong oil pricing, but this is certainly a new territory for crude oil, and if sustained there is bound to be some impact on the economy," said Victor Shum, an energy analyst at Purvin & Gertz in Singapore.

James Cordier, president of Liberty Trading Group in Tampa, Fla., notes that oil prices often peak in September and follow demand lower in the fall.

"We're really wondering where demand will come from to support $80 crude oil," Cordier said.

At the pump, meanwhile, gas prices slipped 0.7 cent overnight to a national average of $2.808 a gallon, according to AAA and the Oil Price Information Service.

Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May.

Energy-industry analysts say much of the recent advance in crude-oil prices has been due to buying by large investment funds.

The low U.S. dollar, which encourages buying by foreign investors, has also played a role.

"Most large financial institutions have gone long on crude, and each new high tested equates to substantial profits," wrote Simon Wardell, an energy analyst at Global Insight in London, in a research note.

Despite oil's run, Cordier doesn't believe gas prices will rise substantially.

Gasoline demand typically drops in the fall, and beginning Saturday, refiners will be able to sell cheaper winter-grade gasoline.

"Gasoline just really has a difficult time staying high this time of year," said Cordier.

Associated Press reporters Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.