Oil Briefly Rises Above $92 A Barrel On Mideast Tensions

Friday, October 26th 2007, 7:18 am
By: News On 6

Crude oil prices spiked above $92 a barrel Friday on tensions in the Middle East and renewed concerns about supply.

The United States announced new sanctions against Iran on Thursday, targeting the elite Revolutionary Guards, which Washington accuses backing Shiite militants in Iraq. A confrontation between the world's largest oil consumer and its fourth largest oil producer could upend markets.

Parallel to fears of a broader conflict in the Middle East were new oil supply concerns.

Light, sweet crude for December delivery rose 88 cents to $91.34 a barrel in electronic trade on the New York Mercantile Exchange by early afternoon in Europe. It briefly rose to a new trading record of $92.22 during Asian trading.

The Nymex crude contract jumped $3.36 to settle at $90.46 a barrel Thursday in the U.S., closing above $90 a barrel for the first time.

``With oil taking the $90 hurdle, a price of $100 seems more and more likely, if only for speculative reasons,'' Commerzbank commodity analyst Eugen Weinberg told Dow Jones Newswires.

December Brent crude rose 97 cents to $88.45 a barrel on the ICE futures exchange in London, down from an earlier high of $89.30.

``The market is really quite worried about supply,'' said Tetsu Emori, commodity markets fund manager at ASTMAX Futures Co. in Tokyo. ``Oil is quite imbalanced. It is quite tight.''

The combination of supply worries and geopolitical concerns has pushed crude oil prices up more than 7 percent since Tuesday.

Prices first jumped sharply Wednesday after the Energy Information Administration reported that oil inventories fell 5.3 million barrels last week when analysts had expected them to grow 300,000 barrels.

That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.

On Thursday, Organization of Petroleum Exporting Countries Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. The comments counter rumors that Saudi Arabia is pushing for another production increase after pressuring the group into one of similar size that goes into effect Nov. 1.

While U.S. crude stocks fell to a nine-month low last week, Dow Jones reported that Oil Movements, a company that tracks oil tanker traffic, said the extra crude shipments from OPEC members next month will grow more slowly than anticipated.

Energy traders also remain concerned a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq. Turkey has warned it will decide whether to cross into Iraq in pursuit of Kurdish guerrillas regardless of U.S. objections, and U.S.-made Turkish fighter jets patrol the skies near the Iraqi border.

Turkish artillery has been periodically firing across the border, and Turkish television showed video of smoke rising from three villages in northern Iraq that were purportedly hit by shells Thursday.

Lebanese troops fired on Israeli warplanes Thursday, and while a conflict between Israel and Lebanon would not directly affect oil supplies, traders worry that any hostilities in the Middle East would draw in oil producers such as Saudi Arabia and Iran.

On Friday, gunmen in speedboats attacked an oil vessel off the coast of Nigeria at dawn and kidnapped six workers, Italian energy giant Eni SpA said.

Traders were also watching storms form near the Gulf of Mexico, where there are major oil operations.

``In this edgy market, we would still point to a tropical disturbance over the Virgin Islands which has ... some potential to become a Tropical Depression and could veer toward the (Gulf),'' said Olivier Jakob from Switzerland's Petromatrix. ``We would not qualify it yet as a threat to oil assets but ... we will pay attention to any upgrade on that disturbance.''

Nymex heating oil futures rose 1.36 cents to $2.4220 a gallon (3.8 liters) while gasoline prices added 0.72 cents to $2.2430 a gallon. November natural gas futures fell 1.6 cents to $7.172 per 1,000 cubic feet.