Gloomier Gulf News Ignites Oil Price Rise

Oil prices, after falling a record $4 a barrel Monday, bounced back Tuesday as traders took stock of the latest developments in the Persian Gulf, including reports that Iraq has massed 265,000 troops in or near Kuwait and has detained nine more Americans.

West Texas Intermediate for October delivery closed up 97 cents at $27.88 a barrel on the New York Mercantile Exchange. It is the benchmark U.S. crude.

“It’s a little less chaotic than yesterday. . . . It’s very nervous trading,” said Brendan Dolan at Dean Witter Reynolds.

The oil market plummeted Monday on speculation that the danger of war in the Persian Gulf was receding before a planned meeting Thursday between United Nations Secretary General Javier Perez de Cuellar and Iraqi Foreign Minister Tarik Aziz in Amman, Jordan.

“We ended higher, yet a lot of the news is bearish,” said an analyst who requested anonymity. “I thought we would see more what we saw yesterday.”

Although the price of spot crude was higher, prices for later contracts were lower. Traders said losses in later months were a correction of a distortion that developed Monday: Trading limits prevented those contracts from falling as steeply as prices for current delivery.

Light sweet settled 66 cents lower to 99 cents higher, with the contract for delivery in October at $27.88 a barrel; heating oil was 1.79 to 4.43 cents lower, with September at 79.52 cents a gallon; unleaded gasoline was 6 cents lower to 0.97 cent higher, with September at 88.53 cents a gallon.

Analysts said the market’s attention was also fixed on the meeting in Vienna of the Organization of Petroleum Exporting Countries. At the end of Tuesday’s session, OPEC ministers appeared to be at an impasse. Iran refused to back a proposal by the majority of the members to raise output because of the Mideast crisis.

Iran demanded that any boost in OPEC output be linked with Western nations drawing on their petroleum stocks to ease shortages caused by Iraq’s invasion of Kuwait on Aug. 2.

The surprise Iranian proposal, to be put on the table at the OPEC session today, was expected to complicate efforts to conclude an accord.

Later in the day, the American Petroleum Institute reported that U.S. crude stocks held at refineries and by oil companies rose unexpectedly last week. But gasoline stocks fell, as wholesalers and retailers bought whatever they could in case of a further disruption in supply from the Mideast.

Although the reported buildup in crude inventories was unexpected, analysts said, the futures market was likely to focus mostly on the gasoline figures today. Gasoline stocks are 12.6 million barrels below year-ago levels, the industry group said.

Most analysts attributed the decline in gasoline inventories held by the oil companies to continuing uncertainty over the Persian Gulf situation.

As of Friday, 376.6 million barrels of crude oil were in storage, compared to 375.7 million a week earlier. The figure is more than 11% higher than the 337.3 million in storage at this time last year.

Gas stocks last week were 210.9 million barrels, compared to 214 million a week earlier and 223.5 million at the same time last year.