Crude Oil Prices Top $35 a Barrel on War Worries : Energy: A speech by Saddam Hussein and a pinch in foreign supplies send petroleum prices to a record high at the N.Y. Merc.
Energy prices soared again Friday, with November crude oil futures leaping more than $2 a barrel to a record high above $35 on tough talk by Iraqi leader Saddam Hussein and signs of tight petroleum supplies overseas.
A barrel of West Texas Intermediate--the U.S benchmark crude that heavily influences other petroleum prices--to be delivered in November rose $2.01 a barrel to $35.43 on the New York Mercantile Exchange. The surge in oil prices carried over into gasoline and home heating oil futures, which posted sharp gains as well.
The closing price was another record high for the Merc, which began trading in oil futures in March, 1983. The previous Merc crude oil high was reached only on Thursday, when the price of October crude closed at $34.71. That was the last day of trading for October oil futures.
The market on Friday was rattled by Hussein’s speech on Iraqi television in which he called on his people to prepare for war, which would be bound to disrupt production and distribution of much of the world’s oil. In a report issued Friday, the World Bank predicted that a Mideast war could send oil prices soaring to $65 a barrel this year and then remain at $30 to $40 a barrel during the next five years.
“The thinking in the market is that a war is almost inevitable,” said Andrew Lebow, an oil industry analyst at E. D. & F. Man International Futures Inc., a New York brokerage firm.
The growing expectation of war and uncertainty over supplies has also reduced the pool of sellers, who want to hold onto their oil in case shortages develop, traders said.
“A shortage mentality is beginning to creep into the market,” Lebow said.
According to traders, oil prices were also riding the momentum that pushed October oil up nearly $2 a barrel on Thursday. “We went out real strong (on October oil futures) and that cleared the path for November,” said Tom Bentz, director of trading at United Energy, a New York trading firm.
Predictions of a colder-than-normal winter in the Northeast and the closure of several Gulf of Mexico coast refineries for maintenance contributed to sizable price increases in gasoline and home heating oil futures. Unleaded gasoline for October delivery soared 5.91 cents to 97.45 cents a gallon and October heating oil jumped 5.35 cents to 97.21 cents a gallon. Trading in October gasoline and heating oil ends next week.
Industry observers also noted that worldwide embargo against Iraqi and Kuwaiti crude oil has taken a bigger toll so far on European nations, which have bid up prices of crude oil, gasoline and home heating oil as they seek out new supplies. A major Algerian oil refinery also has been shut down for maintenance, further reducing the flow of refined fuel to Europe.
But Europe is not the only region feeling the petroleum pinch. “The Far East is becoming very, very tight for products, namely jet fuel,” said Bentz at United Energy. “We are now starting to see the effect of the lost (Iraqi and Kuwaiti) products in the marketplace.”
If petroleum and gasoline futures prices remain at current levels, the pump price of regular unleaded gasoline could rise to about $1.50 or $1.60 a gallon in some regions, Bentz said.
OIL PRICES
Friday: $35.43, up $2.01
