Energy prices rose sharply today in a broad rebound after Wednesday’s sell-off, mostly on concerns over the Middle East.
West Texas Intermediate for October delivery, the benchmark grade of U.S. crude, rose $1.37 to $27.29 a barrel at 1 p.m. on the New York Mercantile Exchange, the world’s largest energy market.
On Wednesday prices fell nearly $2 a barrel to their lowest level in three weeks as OPEC freed its members to increase production during the Mideast crisis.
But prices snapped back today.
A delay in Iraq’s promised release of Western women and children contributed to fresh worries about tensions in the Persian Gulf. And a temporary shutdown of a Norwegian oil platform in the North Sea also supported prices, traders said.
Refined product prices also rebounded today after falling along with crude oil on Wednesday. Unleaded gasoline for September delivery jumped 6.38 cents to 91.50 cents a gallon after falling 3.81 cents Wednesday.
Ongoing tensions in the Middle East continue to underpin prices, while OPEC’s agreement allowing higher production by members limited gains, traders said.
The agreement by the Organization of Petroleum Exporting Countries freed heavyweight producers such as Saudi Arabia and Venezuela to boost output.
The cartel is trying to ensure that the U.N.-sponsored international embargo against oil from Iraq and Iraqi-held Kuwait does not create shortages.
Crude oil has soared as high as $32 a barrel since Iraq’s Aug. 2 invasion, from about $21 a barrel on Aug. 1 and as low as $14 a barrel in May.
Meanwhile, war jitters will keep oil prices above $25 while actual fighting would push them up another $20, international traders said today.
They said that even with the increase in OPEC output, the market will be short 1 million to 2 million barrels a day in the fourth quarter.
Industry sources say OPEC could supply an extra 3 million to 3.5 million barrels daily, compared with 4 million throttled by the embargo on Iraq.