Oil Tops $40 Again on Latest Hussein Threat

Oil prices flared nearly $2 higher to more than $40 a barrel today in response to Iraqi President Saddam Hussein’s threat to strike against Israel after the killing Monday of 19 Palestinians.

“The war premium just went up another $1.50 a barrel based on rhetoric coming out of Iraq,” said Brian Tagler, analyst at Shearson Lehman Hutton.

In early afternoon trading on the New York Mercantile Exchange, West Texas Intermediate, the benchmark U.S. grade, rose a hefty $1.75 to $40.70 a barrel, a record high for the futures contract. It eclipsed the old high of $40.10 set on Sept. 27.

Brokers said oil in the U.S. spot market was pegged at record highs, with some grades of oil fetching close to $42 a barrel. The last time spot prices approached this level was in 1980, when the Iraq-Iran War set off panic buying.

Prices have doubled since Iraq’s Aug. 2 invasion of Kuwait because of fears that fighting would disrupt supplies.

Traders said they feared the crisis in the Mideast was near a flash point after Hussein’s speech.

Analysts said crude will likely push to $42 a barrel in the near term.

“Any way Israel provokes Arab anger cannot be positive,” said Jayne Ball, analyst with New Century Resources Corp.

But others agreed with President Bush’s assessment that Israel’s actions had little bearing on the U.S.-Iraqi confrontation.