Soviet, Iran Reports Boost Oil Futures : November Crude Price Hits $28.90 a Barrel
Prices of crude oil and petroleum products for future delivery surged on world markets Thursday on reports that the Soviet Union had suspended many deliveries scheduled for October and that Iran’s production had significantly slowed.
The Soviet Union, the world’s largest oil producer, exports 1.75 million barrels a day to countries outside the Soviet bloc. Oil traders said the suspension might affect 70% to 80% of Soviet crude oil exports and 60% to 70% of exports of gasoil, a refined product used to make heating oil.
Meanwhile, analysts said it appears that Iranian production has slowed from 1.6 million barrels daily to 100,000 to 500,000 barrels after three Iraqi air attacks on its main export terminal within the last few days.
Crude oil for November delivery closed at $28.90 a barrel, up 48 cents from its opening price on the New York Mercantile Exchange. Contracts for future delivery of heating oil rose by almost 2 cents, closing at 82.49 cents a gallon and gasoline futures closed at 79.6 cents a gallon, an increase of almost a penny. “It was a buying orgie,” one trader commented.
Conoco Ups Price
Also Thursday, Conoco, a leading domestic oil company, said it is raising the price it will pay for benchmark West Texas Intermediate crude oil by 45 cents to $27.60 a barrel effective Oct. 1.
It was unclear how long the unconfirmed Soviet suspension might last and estimates by oil analysts in New York ranged from three days to several months. Analysts said the suspension was apparently caused by shortages within the Soviet Union, where oil production is about 3% lower than last year, and has averaged below government targets.
Peter C. Beutel, an analyst with Rudolff Wolf Energy Futures in New York, said Iran told its customers that it could no longer commit itself to shipments of crude oil from Sirri Island until mid-October, apparently a result of the attacks. He estimated it would take Iran up to three months to repair damage to its terminal at Kharg Island, which is 30 miles off the Iranian coast. The terminal has been the target of more than 10 air attacks in the last five weeks.
Dillard Spriggs, president of Petroleum Analysis, a New York consulting firm, said that the chief concern is that Iran will follow through on threats to retaliate against Saudi Arabia and Kuwait, chief supporters of Iraq in its war with Iran and important oil producers.