Crude Oil Prices Top $32, Then Slip Back
Crude oil prices leaped more than $1 a barrel early Friday on ominous news out of the Mideast. But after trading in the thin air above $32, prices slipped back to close at $31.76 a barrel, up 69 cents, as crisis-weary traders pocketed their profits.
The wholesale prices of unleaded gasoline and home heating oil fell Friday.
“It was another kind of flaky day in the market,” said Kevin Kelly, manager of futures trading at San Francisco-based Chevron Corp.’s international oil company.
Traders said the volatile market reacted early in the day to reports that Iraqi troops had entered the French, Canadian and Belgian diplomatic compounds in Kuwait and that a U.S. ship had fired shots across the bow of an Iraqi tanker and then boarded the vessel. In addition, an announcement by Saudi Arabia that it will not be able to deliver all the light Arab crude it had promised to customers in October pushed prices higher.
On the New York Mercantile Exchange, the October contract price for light crude oil--often called West Texas Intermediate, a benchmark U.S. crude--quickly shot as high as $32.20 a barrel, up $1.03 from Thursday’s closing price.
Oil was trading at about $21 a barrel just before Iraq’s Aug. 2 invasion of oil-rich Kuwait, and prices have been up sharply since then because of fears that a war would severely disrupt world oil supplies. Light crude oil has never traded higher than $32.35, which it hit on Aug. 2, 1983, and matched this last Aug. 23, but traders have been reluctant to cross that level.
The market calmed down somewhat later Friday after President Bush, though condemning the invasion of the ambassadors’ residences, said the most recent incidents do not put the United States “closer to a war situation.”
Traders also cashed in the gains they had made from the price run-up earlier in the day, although the trend for the week was higher, gaining $1.76 from the previous Friday.
Unleaded gasoline for October delivery fell 3 cents a gallon Friday to close at 90.36 cents a gallon. Home heating oil for October delivery closed at 82.79 cents a gallon, down 0.69 cent.
Lebow blamed the gasoline price slump on relatively high supplies. “Maybe the higher pump prices are starting to cut demand,” he said.
Kelly noted that Friday was the last day to trade October contracts for gasoline and heating oil. “Some strange things happen when contracts expire,” he said.
