From Oil settles above $78, sets new record:

Oil futures settled at a record high above $78 Tuesday on expectations that crude inventories fell last week and reports of new violence in Nigeria, a large oil producer and key supplier to the U.S.

Investors believe Wednesday’s inventory report by the Energy Department’s Energy Information Administration will show that refiners drew down oil inventories as they continued to increase gasoline production last week, analysts said.

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Light, sweet crude for September delivery gained $1.38 to settle at $78.21 a barrel on the New York Mercantile Exchange. That puts futures within striking distance of the intraday record, and beat the settlement price record of $77.03 set the same day.

I intentionally try very hard to avoid talking about short-term price trends, as I think it’s far too easy to fall into orbit around such data and ignore other, more important, data and trends.

Having said that, hitting a record high in nominal prices with no major upheaval from a hurricane or a war in the Persian Gulf area (aside from the Iraq debacle, of course) is at least mildly noteworthy. (Plus, I’ve had a few frantic e-mails from people I don’t know, but apparently read this site.)

The single most important thing to read from this number is that we shouldn’t read too much into such numbers. Right now it’s a one-day event, the economic equivalent of an anecdote. If oil prices go on a tear for clearly defined reasons (oil stockpiles are down, OPEC refuses to ship more, US refineries finally get into overdrive and create even more of a draw on oil stockpiles), then it’s time to start looking closely at the factors in play and asking What It All Means.

Let me also remind everyone that we should all ignore comments about how oil, “could go to $150 if the US attacks Iran” or similar wildly hypothetical situations. No one on this planet knows what oil could or should or would do under extraordinary circumstances, and those claiming otherwise should be ignored.