Oil Prices Increase Sharply as Day of Reckoning Nears

Oil prices were sharply higher this morning in nervous trading the day before the U.N.-imposed deadline on Iraq to leave Kuwait.

Crude oil opened about $4 per barrel higher today on the New York Mercantile Exchange, following an earlier rally in London.

Traders were responding to U.N. Secretary General Javier Perez de Cuellar’s failure to achieve a peaceful solution to the Persian Gulf crisis, as well as today’s vote by Iraq’s lawmakers, who endorsed going to war in an effort to keep oil-rich Kuwait.

“Some people still feel that an 11th-hour settlement might come, but the jitters are too strong for this market to hold down,” said Thomas P. Blakeslee, an energy analyst at Pegasus Econometric Group Inc. in Hoboken, N.J. “You’ve got to look for a lot of rumors to be coming out.”

Light sweet crude oil for February delivery hit an early high of $32 per barrel this morning, up $4.71 over Friday’s close at the Mercantile Exchange. After several minutes of trading, crude was at $31.25 per barrel, up $3.96.

At the same time in London, Brent crude was up $4.08 per barrel at $29.75 on the International Petroleum Exchange.

New York traders said prices began tapering off slightly after the strong opening amid the overall uncertainty, but they remained well above their closing prices from the previous session.

“A lot of people are kind of backing off, waiting to see where this is going to end up,” said Brian Tagler, an oil broker with Shearson Lehman Brothers Inc. “This rally has to last a little longer than 20 minutes to attract new buying.”

Other energy futures in New York shot up immediately on the opening, and traders said the refined petroleum product prices were keying off the higher crude prices.