Oil Prices Rise Sharply Amid Uncertainty
Oil prices rose sharply for the second straight day today as traders, uncertain over what may happen next in the Persian Gulf, bought up supplies in advance of the Labor Day weekend.
Crude oil for October delivery was up 84 cents at $27.61 a barrel after rising 85 cents Thursday on the New York Mercantile Exchange. Unleaded gasoline rose 4.43 cents to 93.50 cents a gallon.
Natural gas was up from $1.537 to $1.548 per 1,000 cubic feet on October contracts.
“I’m surprised at the market’s strength,” said Chris McCormick, a broker at Smith Barney.
He and others said they had expected price gains to be limited by an apparent easing of tensions in the gulf and OPEC’s decision this week to sanction an increase in production.
Prices have seesawed this week as traders have alternately looked to the gulf and to Vienna, where the Organization of Petroleum Exporting Countries met.
Early in the week, oil prices fell as tensions seemed to cool in the Middle East. After OPEC’s decision on production, oil prices dropped to their lowest levels since shortly after Iraq invaded Kuwait on Aug. 2. But since then prices have again crept upward.
OPEC’s statement Wednesday freed nations such as Saudi Arabia, Venezuela and the United Arab Emirates to pump more oil to replace most of the 4 million barrels lost daily because of the U.N. embargo on Iraq and Kuwait.
Although the increases had been widely anticipated, even without an OPEC agreement, prices tumbled.
But once the selling was out of the way, traders refocused on the tensions in the gulf, and prices began to climb again.
“Four weeks after Saddam Hussein’s troops invaded Kuwait the future developments in the region are as uncertain as ever,” according to a report from oil brokers E. D. and F. Man International.
October Brent crude, a world benchmark, was quoted at $26.50 a barrel, up 55 cents from Thursday’s New York close.
Trading was thin both in New York and London.
“It’s Friday, the gulf is still in crisis, and no one wants to leave their (trading) positions open,” one London-based broker said.
U.S. traders have been making sure they have sufficient supplies for the three-day weekend.
“The bigger risk is that prices will go up if anything happens in the gulf over the weekend,” one trader said.
