Oil prices surged by as much as 44 cents a barrel Tuesday after Kuwait's oil minister said OPEC production is running 15% below its official ceiling and Iran warned that it can close the entrance to the vital Persian Gulf oil route.
On the New York Mercantile Exchange, West Texas Intermediate, the benchmark U.S. crude for immediate delivery, shot up 44 cents to $18.71 a barrel in a late-session buying spree. On the U.S. Gulf Coast spot market, it rose 20 cents to $18.75 a barrel.
On the European spot market, where oil is sold to the highest bidder, Britain's North Sea Brent crude jumped by 25 cents to $18.25 a barrel. The United Arab Emirates' Dubai Light, a key OPEC crude, added 10 cents to $16.90 a barrel.
Home-heating oil for immediate delivery on the Merc gained 1.19 cents to 50.50 cents a gallon, and unleaded gasoline climbed 1.11 cents to 53.98 cents a gallon.
Peter Beutel, analyst at Elders Futures Inc. in New York, said home-heating oil's strong showing helped to push up crude oil prices in trading dominated by technical factors.
"The market responded positively to the Kuwaiti oil minister's statement that OPEC is producing 2.4 million barrels less than its quota and clearly reacted to the placement of Silkworm missiles by Iran at the mouth of the Persian Gulf," said Sanford L. Margoshes, analyst at Shearson Lehman Bros. Inc. in New York.
Kuwaiti Oil Minister Sheik Ali Khalifa al Sabah told the Kuwait newspaper Al Rai al Am that oil prices would rise next month because OPEC is producing only 13.4 million barrels a day, 15% below its self-imposed limit of 15.8 million barrels a day.
Iranian Parliament Speaker Hashemi Rafsanjani, in an interview broadcast on Tehran radio, said his nation has enough artillery to close the Strait of Hormuz at the mouth of the Persian Gulf without resorting to missiles.
Reports in the United States said Iran has installed Silkworm missiles in the strait to use against its OPEC archenemy Iraq in the 6 1/2-year-old Persian Gulf war.