Oil jumps as market frets over Iraq
Oil jumps as market frets over Iraq
New York, Reuters
World oil prices powered towards 19-month highs on Tuesday as the threat of severe storm disruption to Gulf of Mexico oil and gas operations preyed on a market already nervous over potential conflict in Iraq.
New York crude futures for November delivery jumped 55 cents to US$31.00 a barrel by 1.15 p.m Jakarta time (17.15 GMT), while London benchmark Brent crude futures stood 46 cents higher at $29.21 a barrel.
U.S. prices came within 25 cents of their highest level since February 2001 as Gulf producers were forced to airlift crews and start shutting in production for the second time in two weeks as Hurricane Lili bore down on the oil-rich region.
Shell Oil Co., the biggest Gulf producer, and other oil producers and port operators said on Tuesday they will shut in activities by as early as the day's end due to forecasts of strong winds and powerful waves from Hurricane Lili.
Lili is currently packing winds of 85 miles per hour (137 kph) and is expected to reach the oil-production areas of the Gulf of Mexico late Wednesday or early Thursday.
Gulf oil and gas operations are still recovering from last week's Tropical Storm Isidore, which forced oil firms to cut roughly 1.4 million barrels per day (bpd) of the Gulf's 1.5 million bpd oil production capacity.
New supply figures from the American Petroleum Institute after close of trade on Tuesday are expected to show a big fall in crude stocks -- already at their lowest level in 19 months -- ahead of the key winter season -- because of Isidore.
"It is hard to be bearish on oil ahead of a possible mammoth U.S. stock draw, another hurricane in the Gulf of Mexico and with the United States appearing to make progress in persuading U.N. Security Council members to support its position for a tough resolution against Iraq," said GNI Research analyst Lawrence Eagles.
Oil prices are up more than 40 percent over the year, spurring fears that steeper energy costs for consumers and businesses could thwart the economy's move out of recession.
The OPEC oil cartel's decision earlier this month to hold production quotas at the lowest level in a decade has helped run U.S. inventories down despite sluggish fuel demand in a shaky global economy.
Indonesian Oil Minister Purnomo Yusgiantoro said on Tuesday that leading OPEC member Saudi Arabia was prepared to raise output if the price of an OPEC basket of crude stayed over $28 a barrel for 20 days.
A price stability formula devised by OPEC two years ago allows for the group to lift output by 500,000 barrels a day if prices stray above its $22-$28 a barrel target range for 20 days.
Saudi Arabia is OPEC's biggest and most influential producer and would need to back any action for an increase to be implemented.
The basket of seven crude was priced at $28.34 a barrel on Monday, the sixth consecutive day above the top end of the range.
Traders are also awaiting concrete developments from talks in Vienna between U.N. weapons inspectors and Iraqi arms experts aimed at warding off a full-scale military attack led by the United States.
Dealers fear conflict in the Middle East could disrupt supplies from a region that pumps a third of the world's oil and holds almost all its spare production capacity.
The talks in Vienna are the first test of Iraq's cooperation since Baghdad agreed on Sept. 16 to the unconditional return of the inspectors.
On Tuesday, the second and final day of talks, Iraq is expected to make a show of good faith by handing over to the inspectors long-overdue information about its nuclear facilities.
However, this change of heart comes amid increasingly tough language from the United States and Britain who accuse Iraqi President Saddam Hussein of stockpiling weapons of mass destruction.
The United States intensified lobbying of U.N. Security Council members in support of a resolution that allows Washington to strike Iraq if it perceives violations.
U.S. President George W. Bush is expected to meet congressional leaders on Wednesday to craft a resolution authorizing a strike on Iraq.