Crude Oil Rises to Record on Concern Turkey May Attack Kurds
By Christian Schmollinger and Gavin Evans
Oct. 16 (Bloomberg) -- Crude oil rose to a record above $86 a barrel because of concern Turkey may attack Kurdish militants in Iraq and disrupt shipments.
Oil has gained $3 this week as Turkish Prime Minister Recep Tayyip Erdogan asked lawmakers to approve military action against rebels in Iraq, holder of the world's third-largest oil reserves. Declines in the dollar and U.S. equities prompted some investors to shift into oil and other commodities.
``The concern is that an attack will destabilize Iraq further and that will disrupt the limited output from Iraq,'' said Dariusz Kowalczyk, chief investment strategist with CFC Seymour Ltd. in Hong Kong. ``And that may carry over to the whole Middle East.''
Crude oil for November delivery rose as much as 66 cents, or 0.8 percent, to a record $86.79 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $86.73 at 1:29 p.m. in Singapore.
The contract settled $2.44, or 2.9 percent higher, at $86.13 yesterday. Oil futures reached $86.71, the highest since being introduced in 1983.
``This is something that Turkey has probably wanted to do for a long time,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``You have the weak dollar, and concerns about the U.S. economy, and that is just spilling into the buying of commodities.''
``Show Restraint''
Turkish lawmakers have been asked to approve legislation allowing the military to launch attacks on bases of the Kurdistan Workers' Party, or PKK, during the next year. Last week, Erdogan said there were no plans for immediate action.
Turkey must ``show restraint'' and avoid any military action against the PKK, said White House spokesman Gordon Johndroe in a statement yesterday. ``We urge the Turks to continue their discussions with us and the Iraqis,'' said the statement. ``We all have an interest in a stable Iraq and a desire to see the PKK brought to justice.''
Iraq's oil-rich northern region is controlled by a semi- autonomous Kurdish administration. Oil pipelines run through southern Turkey where many of the PKK attacks have occurred.
The risk to oil supplies from a Turkish attack ``most likely is far less than the market is pricing in,'' Altavest's Hartmann said. ``It's not really a win-win for either of these parties to get into a tit-for-tat bombing of infrastructure.''
Brent, Commodities
Brent crude oil for November settlement climbed 34 cents, or 0.4 percent, to a record $83.09 a barrel, on the London-based ICE Futures Europe exchange at 1:15 p.m. Singapore time. It rose $2.20, or 2.7 percent, to close at $82.75 a barrel yesterday.
The November contract expires today. The more active December futures were at $82.61 a barrel, up 34 cents, at 1:25 p.m. Singapore time.
Crude-oil and other commodities also rose as the U.S. dollar declined against the euro, enhancing their appeal as an investment. The Standard & Poor's 500 Index fell 0.8 percent to 1,548.71 yesterday after Citigroup Inc. said loan defaults will plague the financial industry for the rest of the year.
``We also had a decline in the dollar yesterday and that made commodities attractive,'' said CFC Seymour's Kowalczyk.
In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil benchmark, is up 41 percent so far this year. Oil is up 31 percent in euros, 35 percent in British pounds and 39 percent in yen.
``Bullish Throes''
OPEC members have said a falling dollar justified higher prices because oil-producing countries sell oil in dollars and often buy goods in euros. OPEC will discuss the impact of the falling dollar when members meet on Dec. 5, Algerian Oil Minister Chakib Khelil said yesterday.
``The market is just caught up in these bullish throes'' and may push prices to $90, Altavest's Hartmann said. ``Supplies aren't that critically tight at this point.''
Oil prices gained 7 percent the past week after the International Energy Agency said world fuel stockpiles fell below the five-year average in September, and a report showed U.S. crude oil stockpiles unexpectedly fell a week earlier.
An Energy Department report tomorrow will probably show U.S. stockpiles gained 1.5 million barrels last week as refiners shut units for maintenance before the winter demand peak.
Inventories held 320.1 million barrels on Oct. 5, 8.3 percent more than the five-year average for the period, the department said last week.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
Last Updated: October 16, 2007 01:35 EDT |
