Oil up; gas leveling off

    NEW YORK _ Retail gas prices fell more than a cent over the
weekend, offering further evidence that prices may have peaked for
the year. However, oil futures soared once again Monday, nearing
$120 a barrel as supply threats emerged overseas and the dollar
weakened against the euro.
    At the pump, the average national price of a gallon of regular
gas slipped to $3.611 a gallon on Monday, down 1.1 cents from
Friday, according to AAA and the Oil Price Information Service.
Prices peaked at a record $3.623 a gallon on Thursday.
    Diesel prices also fell, slipping to a national average of
$4.239 from a record $4.251 on Thursday. The runup in prices of
diesel, used to power most trucks, trains and ships, is one reason
why food prices are so high.
    The slight relief motorists are seeing at the pump could end
quickly if oil's rise continues. Analysts say gas prices could
still go up another 10 cents or so. Indeed, Andy Lebow, senior vice
president at MF Global Inc., thinks the gas price declines of the
last four days are almost entirely due to crude oil's sharp drop
last week; prices fell from a trading record $119.93 on Monday as
low as $110.30 on Thursday before rebounding. Gas prices tend to
follow prices in the futures market, but with some lag.
    On Monday, light, sweet crude for June delivery rose $3.12 to
$119.44 a barrel on the New York Mercantile Exchange.
    ``The (oil) market is bolstered by news out of Iraq, where
Turkish forces have once again been involved in cross-border raids
against ... insurgents, and Nigeria, where rebels attacked three
oil wells and pipelines feeding (an) export terminal over the
weekend,'' said Addison Armstrong, director of market research at
Tradition Energy in Stamford, Conn., in a research note.
    Kurdish rebels on Monday warned they could launch suicide
attacks against American interests to punish the U.S. for sharing
intelligence with Turkey after Turkey bombed rebel bases in Iraq on
Friday. Oil traders worry that any conflict in the oil-rich Middle
East will cut oil shipments out of Iraq.
    In Nigeria, a Royal Dutch Shell PLC spokesman said attackers hit
an oil facility belonging to Shell's joint venture in southern
Nigeria and that some oil production has been shut down. Nigeria is
a major U.S. crude supplier.
    Also pushing oil prices higher were concerns about Iran after
Supreme Leader Ayatollah Ali Khamenei said Sunday that his country
will not bend to international pressure and give up its nuclear
program. Iran is the second largest producer in the Organization of
Petroleum Exporting Countries.
    Amid the supply worries, the dollar weakened, giving investors
even more reason to buy crude. Many investors buy commodities such
as oil as a hedge against inflation when the greenback falls. Also,
a weaker dollar makes oil cheaper for overseas investors. Analysts
blame the dollar's protracted decline for oil's rise to records
near $120 this spring.
    Lebow isn't surprised that oil has come roaring back from its
dip to nearly $110 last week.
    ``It really follows the pattern we've seen throughout this
(rally),'' Lebow said. ``The corrections tend to be pretty
short-term in nature.''
    In other Nymex trading Monday, June gasoline futures rose 7.24
cents to $3.0388 a gallon, and June heating oil futures rose 9.92
cents to $3.3179 a gallon. June natural gas futures rose 34 cents
to $11.117 per 1,000 cubic feet.