Asian crude price hits post-Gulf War high over Iraq
Asian crude price hits post-Gulf War high over Iraq
SINGAPORE (Reuter): Crude prices in Asia jumped to a post-Gulf War high yesterday as another round of hostilities between Iraq and the United States sparked a fresh buying flurry.
The benchmark front-month October futures contract on the Singapore International Monetary Exchange (SIMEX) jumped to trade at US$23.80 per barrel, its highest since Iraq invaded Kuwait in 1990 and pushed Brent prices to $40.95.
By late afternoon trading yesterday, the front month contract was last traded at $23.70, up 12 cents from the close on London International Petroleum Exchange (IPE), where Brent is also traded.
The SIMEX Brent price was the highest level reached by Brent in Asian trading, but was just two cents short of London's post- Gulf War high hit overnight on news Iraq had launched a surface- to-air missile at two U.S. fighters patrolling the northern no- fly zone.
The U.S. fighters did not retaliate because they could not lock onto the launch site before its tell-tale radars were switched off.
The U.S. benchmark October contract on the New York Mercantile Exchange (NYMEX) was last traded during Asian hours at $24.76 per barrel, up just one cent from the New York close.
The NYMEX contract trades on a screen-based system called ACCESS when New York is closed.
The latest round of hostilities raised the prospect for a further crude price rally, should the tension increase, oil traders said.
Crude prices often rise during times of tension because of the threat to supplies. Prices are especially sensitive to tension involving the Gulf, where 65 per cent of the world's proven crude reserves sit.
U.S. Defense Secretary William Perry said Saddam Hussein "would soon learn that we are not playing games" and that any retaliation by the U.S. and its allies would be "disproportionate" to what he called new Iraqi provocations.
Eight radar-avoiding F-117A "Stealth" fighters were flying to Kuwait and four B-52s were being transferred from Guam in the Pacific to a British air base in the Indian Ocean.
"If there is any retaliation from the U.S., I strongly believe that the market will rally," one crude oil broker said.
But traders said they did not expect a dramatic rally in the absence of the conflict spreading to involve other countries.
Prices were not likely to match those of the 1990/1991 Gulf War when Brent reached as high as $40.95 per barrel.
"I don't think people believe there's a real potential for the conflict to spread," a Tokyo-based trader said.
"It's difficult to see how the confrontation can in any way effect the supply of oil -- that's what it all boils down to," a another Tokyo trader said.
Last week, the United States launched two missile attacks against Iraq in retaliation for Baghdad's incursion against northern Kurds.
The United Nations put on hold a $2 billion oil-for-food deal with Iraq that would have market Baghdad's return to the international oil market for the first time since the Gulf War with exports of 700,000 barrels per day.
In London, oil prices hit a new post-Gulf War high yesterday as a nervous oil market braced for another U.S. military strike against a defiant Iraq, posing a threat to the world's only spare oil production capacity.
World benchmark Brent blend crude oil futures traded as high as $24.06 a barrel yesterday morning, up 48 cents on the day and besting Wednesday's peak of $23.82 which was the highest prompt price on London's International Petroleum Exchange since January 1991 in the middle of the Gulf War.