Oil prices jump to high for the year

Oil prices hit a new high for the year Wednesday after a government report showed that unused crude being placed in storage slowed a bit last week.

Benchmark crude for June delivery rose 4.6%, or $2.50, to settle at $56.34 a barrel on the New York Mercantile Exchange. It was the highest close since mid-November.

Demand for energy because of the recession has been decimated, leaving storage facilities more bloated than in any year since Iraq's invasion of Kuwait in 1990.

Prices for crude, and gasoline, have plunged as a result, providing a break to everyone from industrial companies to consumers, though that must be taken in the context of shuttered factories and layoffs.

Crude levels for the week ended May 1 rose by 600,000 barrels to 375.3 million barrels, the Energy Department's Energy Information Administration said in its weekly report. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had expected a build up of 2.2 million barrels.

"A sign that demand is improving perhaps? Or maybe those refiners are still indifferent to increasing supply," Phil Flynn, an analyst at Alaron Trading, wrote in a morning note. "It was probably a little of both."

Crude stocks, which rose 4.1 million barrels last week, continue to close in on 19-year highs, analyst and trader Stephen Schork wrote in his daily report.

Meanwhile, the national retail average price for a gallon jumped more than 3 cents overnight to $2.11 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 7 cents a gallon below what it was a month ago, but $1.50 below its year-ago price.

The EIA in its report said gasoline in storage slipped by 200,000 barrels, even though demand continues to fall.

That is partly because refineries have pulled back on production of gasoline as they try to match falling demand. There were signs that those refineries were beginning to ramp up production as the summer driving season kicks off.

There has also been some talk of a recovery for the U.S. economy, and that could mean energy prices will begin to rebound.

The ADP National Employment Report, an unofficial gauge of the labor market, said Wednesday that private sector employment fell 491,000 last month. In the context of today's economy, that was taken as good news. It was much better than the 708,000 jobs lost in March.

On Tuesday, Fed Chairman Ben Bernanke gave his most optimistic prediction yet about the end of the U.S. recession, saying he expects the economy to start growing again this year.

Bernanke cited firmer home sales, a revival in consumer spending and some improvement in lending conditions for banks, businesses and individual borrowers.

U.S. bank stress test results set for release on Thursday and April unemployment figures due out Friday should provide more insight into the state of the economy and the odds that energy prices will increase.

Oil has traded near $50 a barrel for more than a month after dropping from a record $147 last July and rising from below $35 in February.