NEW YORK — A weakened dollar and evidence that OPEC has significantly slowed production sent oil prices soaring to new highs for the year Thursday.
"I think we'll see higher oil prices for a while," said Michael Lynch, president of Strategic Energy & Economic Research. "There's an expectation that the market has bottomed out."
Benchmark crude for April delivery surged $3.47, or 7 percent, to settle at $51.61 a barrel on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
Crude prices have increased 11.6 percent since OPEC ministers met in Vienna on Sunday. The group said it would not cut production again immediately, but there is growing consensus that the millions of barrels taken off the market already each day are starting to balance a supply and demand picture that has been skewed for months.
With the April contract set to expire Friday, most of the trading had shifted to the contract for May delivery, where prices jumped $3.14 to settle at $52.04 a barrel.
Gas prices increased 1.3 cents a gallon overnight to a new national average of $1.933 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are 2.7 cents a gallon cheaper than a month ago and $1.346 a gallon cheaper than last year.
Analysts rushed to buy crude after the Federal Reserve announced late Wednesday it would buy long-term government bonds, a measure that's expected to jolt the economy with lower rates on mortgages and other consumer debt.
The Fed also said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets.
The announcements sent the dollar into a tailspin. The U.S. dollar dropped against other major currencies almost immediately, at one point falling to levels not seen since January. The dollar has fallen about 5 percent against the euro over the past couple days.
Because oil is bought and sold in dollars, a weak U.S. currency makes crude cheaper globally.
"The government is basically printing money to buy back all this paper, and it devalues the dollar," said Phil Flynn, analyst at Alaron Trading Corp.
Flynn said the rise in oil shouldn't be taken as a sign that the economy in on the mend. The Fed is using all of its powers to prop up American businesses, "and this is one of their last shots," Flynn said. "If this doesn't work, they're out of bullets."
A government report that said jobless claims set a new record for the eighth straight week. The Labor Department said continuing claims for unemployment insurance jumped 185,000 to a seasonally adjusted 5.47 million, another record-high and more than the roughly 5.33 million that economists expected.
Initial claims dropped to a seasonally adjusted 646,000 from the previous week's revised figure of 658,000, however. That was better than analysts' expectations.
Job cuts are part of the reason for a severe drop-off in miles driven by Americans, a growing number whom no longer commute to work.
The Federal Highway Administration said Thursday that motorists logged seven billion fewer miles in January, 3.1 percent less than the same period in 2008.
The dour economic news did little to dissuade investors as prices topped $50.47 a barrel, the previous high for 2009.
Part of the reason is that the Organization of the Petroleum Exporting Countries appears to be pushing through the production cuts it promised to make last year, according to tanker tracker Oil Movements. Member states agreed last year to squeeze global oil supplies, trimming 4.2 million barrels per day.
Crude exports from OPEC countries have been shrinking during the past few months. They're expected to drop 770,000 barrels a day in the four weeks leading to April 4, according to an Oil Movements report.
While the recession kept oil near five-year lows, tighter supplies in the spring and summer should buoy crude prices in the next three months, the report said.
Cameron Hanover analyst Peter Beutel said a new high at closing Thursday, along with OPEC production cuts, the federal stimulus package and other bullish factors "are working together to be more important at this moment than the recession and its impact on demand."
"It means things are better than they've been in a while," Beutel said.
Also surging were natural gas prices after a government report showed that U.S. stockpiles fell slightly more than expected last week.
The Energy Information Administration report said inventories held in underground storage in the lower 48 states fell by 30 billion cubic feet to about 1.65 trillion cubic feet for the week ended March 13.
In other Nymex trading, gasoline for April delivery jumped 7.16 cents to settle at $1.4373 a gallon, while heating oil rose 9.2 cents to settle at $1.36 a gallon. Natural gas for April delivery jumped 49 cents to settle at $4.174 per 1,000 cubic feet. In London, Brent prices rose $3.01 to settle at $50.67 on the ICE Futures exchange.
Associated Press writers Ernest Scheyder in New York, George Jahn in Vienna, Austria and Alex Kennedy in Singapore contributed to this report.