Mideast strife drives crude prices higher

Friday, October 13th 2000, 12:00 am
By: News On 6

Analysts' projections may be revised up to $50 per barrel

By Terry Maxon / The Dallas Morning News

Tensions in the Middle East helped push crude oil prices up nearly 3 percent Thursday as traders worried that oil supplies on world markets may be disrupted by the growing strife in that region.

A barrel of West Texas Intermediate crude oil closed at $36.06 in futures trading on the New York Mercantile Exchange, up $2.81 from Wednesday's close. That's a jump of $5.53, or 18 percent, from the $30.53 close a week ago.

The oil markets were rocked by word of increased violence that took the lives of Israeli soldiers in a Palestinian town and an apparent terrorist attack that killed U.S. sailors on a destroyer refueling in Aden, Yemen.

The markets also had to deal with rumors that Iraq was moving troops north and west from the Baghdad area, and word that Iraqi President Saddam Hussein was threatening to shut off oil exports unless some of Iraq's oil proceeds are converted to euros rather than dollars.

"We had plenty of things" to worry about, said energy analyst Tom Bentz of Tom Bentz, Paribas Futures Inc. in New York. "When you're in an environment where stock levels are low as we are now, unfortunately that's what's going to happen."

Some analysts who had been predicting that crude oil could hit $40 are now wondering whether they should raise their expectations.

"If these tensions don't ease, we can see $50 easy," said Daniel Flynn, an analyst with Alaron Trading Corp. in Chicago.

"At this point, I'm going to stay cautious. What happened today can change tomorrow. But tensions have to calm down. If not, we can see prices at $50."

Prices briefly hit $37 a barrel in intraday Nymex trading, nearly reaching its 10-year high close of $37.20, posted Sept. 20, before falling back to $36.06.

The markets had already been jumpy in recent days because of the Middle East turmoil, plus a strike by Venezuelan oil workers that had threatened to disrupt oil production. Venezuela provides about 12 percent of U.S. oil imports.

The recent rise has reversed a brief decline in crude oil markets.

Prices had been falling since President Clinton decided Sept. 22 to release 30 million barrels of oil from the nation's Strategic Petroleum Reserve, which has 571 million barrels of crude oil stored at four sites in Texas and Louisiana.

However, the reserve oil has not yet hit markets, and markets are still waiting to see the impact of a promised Oct. 1 increase in production by members of the Organization of the Petroleum Exporting Countries.

The U.S. Energy Information Administration said crude oil inventories sat at 287.7 million barrels as of last Friday, up 1 million barrels over the previous week, but down 5.2 percent from a year earlier.

On Tuesday, the American Petroleum Institute said inventories had fallen to 283.8 million barrels, down 4 million barrels from the previous week.

Both EIA and API agreed, however, that distillate stocks – diesel, home heating oil and similar products – had fallen during the last week.

The rise in crude oil prices could undercut a current trend for decline. Gasoline prices nationwide have fallen for three straight weeks, averaging $1.50 for unleaded regular in the week ended Monday, EIA reported this week.

"If tensions continue to heat up and we get drawn into this somehow, we're going to be paying a hefty sum at the pumps," Mr. Flynn said.

The rise in oil prices helped push up share prices for many oil and gas companies.

Shares of Irving-based Exxon Mobil Corp. closed at $94.13 on the New York Stock Exchange, up 38 cents. Chevron Corp. climbed 69 cents to $87.31. Dallas-based Triton Energy Ltd., whose stock has been battered in recent weeks, climbed $3.13, up 9.2 percent to $37.19.

The rally also helped oil-service stocks. Dallas-based Halliburton finished $47.63, up $1.19, and Houston-based Baker Hughes Inc. closed up $1.56 to $38.

The Philadelphia Stock Exchange's oilfield services index jumped $3.42 to $135.96.