Oil Price Rises $2 as Kuwaiti Fields Burn

The psychological impact of burning oil fields in Iraqi-occupied Kuwait drove oil prices up more than $2 a barrel by early this afternoon.

The American benchmark West Texas Intermediate crude for February delivery was selling for $23.70 a barrel, up $2.40 from Monday’s close, on the New York Mercantile Exchange after trading as high as $23.95 a barrel.

Today is the last day of trading the February contract on the Merc. The March delivery contract, which will become the exchange’s spot-month contract Wednesday, had gained $1.53 in afternoon trading to $21.85 a barrel.

On London’s International Petroleum Exchange, Britain’s widely traded North Sea Brent crude had risen $1.28 from Monday to $20.25 a barrel.

In Dhahran, Saudi Arabia, a Saudi military spokesman said that aerial photographs showed smoke emerging from Kuwaiti oil wells and storage tanks in the southern part of the emirate.

Iraq had threatened to burn Kuwaiti oil fields if attacked. It was not known, however, if it had carried out its threats or if the fires were ignited by allied firepower.

“What we understand is that the al-Wafra field has been set on fire, but we don’t know whether it is a well or a supply tank. We don’t know what is burning,” Texaco spokesman David Dixon said. Texaco owns 50% of the al-Wafra field, located in the Neutral Zone between Kuwait and Saudi Arabia.

Reports of Kuwaiti oil fields burning were having a “psychological impact” on the market, but little on the fundamentals of supply and demand, said Thomas Blakeslee of the Pegasus Econometrics Group in Hoboken, N.J.

“Kuwaiti oil wasn’t there anyway,” the trader said. Since Saudi Arabia has made up for the oil lost from the U.N. embargo of Iraqi and Kuwaiti exports shortly after Iraq’s Aug. 2 invasion, Kuwaiti crude has not been a factor on world markets.