Crude oil prices surged on world markets today as fears mounted that Iraq would move against Saudi Arabia after establishing control over Kuwait.
On the New York Mercantile Exchange, crude oil futures soared from the opening, with the September contract gaining a record $2.34 to $25.45 in the first two hours of trading.
The trading range, reflecting concerns that no one could tell where Iraq's military machine would stop, fulfills Iraqi President Saddam Hussein's stated wish for a barrel of oil at $25.
"Crude oil prices climbed steadily from the opening and scored gains almost by the minute," said trader Peter Beutel, with Merrill Lynch Futures Inc. "And the market is still moving up, fast."
Crude oil prices gained $1.75 in the first hour of trading, steadily pushing up refined products prices that soared in sympathy.
At noon, unleaded gasoline was quoted up 7.93 to 76.00 cents a gallon. Heating oil was quoted up 6.21 cents to 70.90.
"The crude market rallied strongly on early fears that Iraq was massing troops at the Saudi border," said Steve Platt, senior energy analyst with Dean Witter Reynolds Inc. in Chicago. "Reports that the troops had crossed into Saudi Arabia appeared not immediately correct but prices are moving up to include this eventuality."
Traders and analysts said the market could see some corrections but prices were likely to hold at a high level until the crisis in the Middle East is resolved. They agreed that the most important factor likely to influence the market would be the U.S. response to Iraq's aggressive policy.
"The crude oil price at $25 a barrel seems overdone at this stage, and the barrel could shed $2, but it is likely to hold at the $23 level," Platt said.
In London, the spot price of North Sea Brent Blend, the most widely traded international crude, was quoted at $23.25 a barrel today, up 86 cents from Thursday, when the price rose $2 a barrel.
Stock prices also tumbled overseas in response to the Iraqi invasion.
In Tokyo, the Nikkei Stock Average of 225 selected issues shed 729.42 points, ending the day at 29,515.76. The index lost nearly 593 points on Thursday.
Japan is especially vulnerable to the possibility of a disruption of energy sources because it imports 99% of its oil. Traders there are concerned that the oil price rise will take a heavy toll on Japanese business.