Oil falls after huge rally; Gas inches up

Saudis call for price summit as gasoline at the pump hits record above $4.02.

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By Ben Rooney, CNNMoney.com staff writer

This year, my family finances are ...
  • Better than ever
  • Managing to get by
  • Struggling to keep up
  • In very bad shape

NEW YORK (CNNMoney.com) -- Oil shed more than $4 off the price of a barrel Monday after a Saudi Minister called for international dialog on prices. Meanwhile, gasoline prices extended their rally over the $4 a gallon barrier.

Light, sweet crude for July delivery fell $4.19 to settle at $134.35 a barrel on the New York Mercantile Exchange.

Earlier Monday Iyad Madani, Saudi Arabia's Information and Culture Minister, said the kingdom will call for a summit between oil producing countries and consumer nations to discuss rising energy prices.

"There is no justification for the current rise in prices," he told the Associated Press.

Saudi Arabia is a member of the Organization of Petroleum Exporting Countries (OPEC), which controls much of the world's oil supply.

Madani said the kingdom will work with OPEC to "guarantee the availability of oil supplies now and in the future," according to the AP.

The current president of the Organization of Petroleum Exporting Countries, Chakib Khelil, has said that the cartel will make no new decision on production levels until its Sept. 9 meeting in Vienna.

Madani's remarks came on the heels of the largest single-day jump in oil trading history. The contract shot up $10.75 on Friday - the largest single-day jump on record - to settle at a record $138.54 a barrel.

"In this current emotionally-charged market, high prices have now become the justification for high prices," said oil industry analyst Stephen Schork in a research note published Monday.

"Crude oil may go to $150, it may even go to $200," Schork said. But he warns that the oil market is being driven by a "mania" and is showing signs of a price bubble.

"When this bubble pops, this mania will end the same way all manias before it did, i.e. crashing and giving back all of the accrued gains," he said.

Friday's rally was fueled by a combination of geopolitical jitters, the dollar's decline and a report from Morgan Stanley predicting oil could reach $150 a barrel by July 4.

The dollar rose slightly against the euro in Monday trading.

Oil's volatility continued to drive up gas prices, which shot to another record above $4.02 a gallon Monday.

The national average price for a gallon of gasoline climbed to a record $4.023 a gallon, which is more than 10% higher than $3.692 a month ago and nearly 29% higher than the $3.091 average a year ago, according to the AAA figures.

The average price is $4 a gallon or more in 22 states and the District of Columbia, according to the survey. California pays the most for gasoline, averaging $4.45 a gallon, followed by Connecticut at $4.32 and Alaska at $4.30. Other states above $4 are Hawaii, Illinois, Massachusetts, Maine, Michigan, Nevada, New York, Oregon, Rhode Island, Washington and West Virginia.

Missouri has the lowest average price at $3.83, followed by South Carolina at $3.83.

Gasoline prices in the survey have risen for 32 of the past 34 days, setting records on 30 of those days.

The price of diesel fuel, used by truckers hauling goods across the country, rose 1.1 cent to $4.773 a gallon. That's just under 2 cents below the all-time high set May 30.

Geoff Sundstrom, a spokesman for AAA, says gas prices are being driven by skyrocketing crude oil prices and that a lack of transparency in the oil market makes it difficult to determine if prices are in line with normal market forces.

"There is black hole of uncertainty in the oil market," he said.

Sundstrom says the recent runup in crude prices is the "result of some very suspect information on both output and consumption," and that "governments should do what they can to improve transparency," in the oil market.  To top of page

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