U.S. Crude Prices Hit 20-Year High
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07.28.2004, 01:27 PM
Associated Press
Crude prices shot to a 20-year high as markets reacted Wednesday to a threat by Russian authorities to shut down most of the production from that country's largest oil company.
September contracts of U.S. light crude spiked 3 percent higher to US$43.05 a barrel on the New York Mercantile Exchange - the highest level in the contract's history. Prices eased slightly later in the day to 42.90, up US$1.06 from Tuesday's close.
Russia's Interfax news agency reported that Yukos, battered by a gigantic overdue back taxes bill, said it might have to halt its main production units within a few days because of a bailiffs' order.
The company says it does not have the cash to pay its tax debt, and court orders have frozen assets that it could tap to raise money. Yukos officials repeatedly have warned that the company, which produces 2 percent of the world's oil, is being driven toward bankruptcy.
"The Yukos thing could dramatically affect global oil supplies," said Adam Sieminski, an oil price strategist at Deutsche Bank in London.
Crude supplies are already extremely tight, with Iraq's output hampered by saboteurs and most producers already pumping as much as they can. Saudi Arabia, the only producer that still has significant spare capacity, has boosted its production by about 1 million barrels in recent months.
"Until that shows up and starts building in (storage) tanks, the market's going to remain very nervous," Sieminski said.
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