No News Is Bad News as Jitters Boost Oil Prices : Energy: Reacting mainly to their own Mideast fears, buyers sent futures soaring. Gasoline rose too.
Oil prices soared in heavy trading Thursday on the New York Mercantile Exchange, as investors got a serious case of the Middle East jitters and sent the price of benchmark crude past $31 a barrel.
Light U.S. crude oil for October delivery rose $1.66 to close at $31.43 a barrel. Heating oil leaped 4.87 cents a gallon to close at 88.24 cents--what one analyst called a “huge” jump--and unleaded gasoline closed at 95.07 cents a gallon, up 2.8 cents.
“These are panic prices,” said John Hervey, international oil analyst for the Donaldson, Lufkin & Jenrette investment firm in New York. “The real fact is that very little happened today. Nothing was done. Nothing was said. We’re trading on yesterday’s news--and nerves.”
Many analysts blamed the leap of West Texas Intermediate--the benchmark U.S. crude--on the shooting of an American by Iraqi troops in Kuwait, which was announced by the State Department on Wednesday night.
Another impetus for the price jump was a remark by Assistant Energy Secretary John J. Easton Jr., who told the House Government Operations Committee on Wednesday that oil shortages could develop late this year as a result of the worldwide embargo against Iraq and Kuwait goods, most notably oil.
“All financial markets seem to be waiting for the next piece of news to react to,” said Tom Bentz, director of trading for United Energy Inc. in New York. “Anything that increases the chance of war--(U.N. Secretary General Javier Perez) de Cueller coming home from talks empty-handed, someone smacking a U.S citizen in the face--is going to be reacted to.”
Swirling rumors and simple momentum were also credited. Michael Wilner, president of Hilltop Trading Co. in New York, likened the mercantile exchange to a “drumskin stretched tight,” where the vibrations from a small tap can reverberate.
“The teeniest little movement looks enormous,” Wilner said. “The market moved up merely on the fact that it is moving up.”
Thursday’s increase to $31.43 a barrel marked the first time since Aug. 24 that the October contract for West Texas Intermediate closed above $30. That day it closed at $30.93, and the previous day it had been $31.93--the peak since Iraq invaded Kuwait on Aug. 2.
Although the pace of trading has calmed as traders have become accustomed to high tension levels, Wilner said the New York Mercantile Exchange was “crazy” Thursday. The price of oil jumped early and never backed down, Hervey said.
Analysts called Thursday’s 2.8-cent increase in the October price of a gallon of unleaded gasoline “moderate.” On Wednesday, the American Automobile Assn. reported that retail gasoline prices had fallen at the pump.
The average price of self-serve regular unleaded gasoline for October delivery fell 3.4 cents a gallon nationwide between Aug. 29 and Sept. 5, the organization said. The group’s survey showed that American drivers were paying an average price this week of $1.273 per gallon.
But that’s still an big increase from Aug. 1, the day before the Iraqi invasion, when average retail gasoline prices were 19.8 cents lower.
Analysts were not sure Thursday how long petroleum prices will stay at such high levels, but some prophesied a drop in coming days.
“I’m thinking we could have a technical correction, barring any new events,” said Kevin Kelly, manager of futures trading for Chevron International in San Francisco. “Some kind of correction is in order.”
Said Bentz: “As long as we remain in a stalemate in the Middle East--without any further aggression and (with) diplomatic means still an option--we could be in the $25-to-$30 trading range.”
