Commodity Corner: Fears of Broader Offshore Ban Spark Oil Rally

The price of a barrel of crude oil settled $1.75 higher Thursday after the Associated Press reported that the federal government was going to include shallow water in its moratorium on new offshore drilling permits.

The AP made the claim based on an e-mail from the Minerals Management Service (MMS) reportedly stating that it would not grant new permits regardless of water depth "'until further notice.'" During trading Thursday, the July oil futures contract settled at $74.61. During intraday trading, oil reached a high of $74.95 and a low of $72.32.

In an attempt to clarify the matter, an Interior Department spokeswoman quoted in the article maintains that the moratorium does not include drilling in shallow waters (up to 500 feet deep). However, she does point out that shallow-water drilling projects must first comply with safety and environmental regulations; MMS on Wednesday issued new regulations that will require shallow-water offshore operators to resubmit drilling plans.

Also posting an impressive gain Thursday was the July natural gas futures price, which rose 27 cents to settle at $4.69 per thousand cubic feet. A U.S. Energy Department report revealing a lower-than-expected increase in natural gas in storage prompted the rally. Gas traded from $4.38 to $4.70 Thursday.

The price of a gallon of gasoline settled at $2.08 Thursday, compared to $2.03 the previous day. Gasoline rose to $2.09 and bottomed out at $2.03 during trading.