NEW YORK — Oil prices jumped above $79 barrel Monday, rising to the highest level in seven weeks as an extended cold snap triggered an end-of-year rally in energy futures.
Benchmark crude for February delivery added 78 cents to $78.83 a barrel in light, holiday trading on the New York Mercantile Exchange. Prices rose as high as $79.12 earlier in the day, the highest since Nov. 5.
Prices for oil, natural gas and heating oil have all grown this month as snow storms blanketed parts of the country and a sharp drop in supplies of crude and other fuels surprised traders. More frigid temperatures are expected, with up to 4 inches of snow forecast for New England, and up to 7 inches of snow along the eastern shores of the Lower Great Lakes.
Analyst Phil Flynn noted, however, that energy supplies haven't dropped because of the weather. The U.S. is consuming less petroleum than it did at the same time last year, when oil and gas prices were cheaper and the economy was in recession. Refiners have cut back on imports of oil, he said.
"It kind of makes you wonder why the market can't see through the numbers," Flynn said.
Meanwhile, the dollar has been falling, which can push crude prices higher as well. Oil is traded in dollars, and when the greenback drops, crude contracts are cheaper to buy with foreign currency. It also attracts more money from investors who are looking for a hedge against inflation.
At the pump, retail gas prices rose by less then a penny overnight to a new national average of $2.603 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 2.4 cents cheaper than last month, but it's 97.6 cents more expensive than the same time last year.
In other Nymex trading in January contracts, heating oil climbed 3.69 cents to $2.0725 a gallon while gasoline added 3.05 cents to $2.0201 a gallon. Natural gas increased by 25 cents to $5.893 per 1,000 cubic feet.
In London, Brent crude for February delivery rose 81 cents to $77.12 a barrel on the ICE Futures exchange.