03/01/2012 02:22 EST | Updated 05/01/2012 05:12 EDT

Benchmark oil passes $108 on strong economic data, gas prices highest at this time of year

NEW YORK, N.Y. - Signs of a stronger U.S. economy helped push the price of benchmark oil past US$108 a barrel on Thursday.

West Texas Intermediate crude rose $1.77 to end at US$108.84 a barrel on the New York Mercantile Exchange. Brent crude, which is imported by many U.S. refiners to make gasoline, rose $3.54 to finish at US$126.20 a barrel in London.

Oil prices have risen nine per cent this year because global demand is high and supplies have been disrupted in south Sudan, Syria and elsewhere. There also is concern that tensions with Iran over its nuclear program could lead to further supply problems.

Meanwhile, U.S. retail gasoline prices continued a five-week rise to a national average of US$3.74 a U.S. gallon (3.79 litres). That's up 37 cents per gallon, or 11 per cent, since late January. Prices have never been so high in the U.S. at this time of the year.

Wholesale gasoline futures rose two per cent to finish at US$3.35 a gallon, suggesting that retail prices will keep rising in the coming days. Typically gasoline prices rise in spring as demand rises and refiners begin to make expensive summer blends of gasoline required to meet clean air laws.

The U.S. economy has continued to grow even though high oil prices are taking spending money from consumers and make shipping and travel more expensive.

Economic data released Thursday showed applications for unemployment hit a four-year low, spending on residential construction rose and major retailers reported stronger than expected sales for February.

Stock prices rose on Wall Street on Thursday, helped by the encouraging economic news. That bolstered the feeling that the economy could start burning more oil.

"It's almost impossible for oil to stay down with equities rising," said Rich Ilczyszyn, an analyst at ITrader.

Economists worry that high oil prices will eventually take a toll on the economy, though.

"We've weathered it OK so far, but it could become a much stronger headwind than we anticipate," said Diane Swonk, chief economist at Mesirow Financial.

U.S. consumers have been helped by low heating and electricity bills this winter, which have eased the pain of high fill-up costs.

Natural gas futures fell nearly six per cent Thursday to end at US$2.46 per thousand cubic feet after the government reported that supplies of natural gas declined less than anticipated last week. American supplies in storage are 45 per cent above the five-year average and prices are close to a 10-year low.

In other energy trading, heating oil rose seven cents to finish at US$3.28 a U.S. gallon.