Oil hits record $88 on supply concerns
Pastor Dale Morgan
Oil hits record $88 on supply concerns *
Traders also worried about possible Turkish incursion in Iraq
Oct 16 12:31 PM US/Eastern
By JOHN WILEN
AP Business Writer
NEW YORK (AP) - Oil futures rallied to a new record over $88 a barrel
Tuesday on concerns about disruptions in Middle Eastern crude supplies
and a growing view that domestic supplies aren't sufficient to meet
fourth- quarter demand.
Traders are concerned that a Turkish incursion into Iraq in search of
Kurdish rebels could disrupt crude supplies from northern Iraq.
"Whenever there is any escalation in political tensions in the Middle
East, oil markets become concerned," said David Moore, a commodity
strategist at the Commonwealth Bank of Australia in Sydney. "There is
production and there are pipelines that people worry may be affected if
there are any issues in Iraq."
Turkey's prime minister on Tuesday said Monday's decision to ask
Parliament for permission to pursue Kurdish rebels into Iraq was not a
sign Turkish forces will act immediately.
The Middle East tensions add to supply concerns that have been stoked in
recent days by reports from the Energy Department, the International
Energy Agency and the Organization of Petroleum Exporting Countries
suggesting oil supplies are flat or falling as demand is growing.
Light, sweet crude for November delivery rose $1.94 to $87.07 a barrel
on the New York Mercantile Exchange Tuesday after rising as high as
$88.20 earlier, a trading record.
Many analysts argue that the supply and demand fundamentals don't
support oil in the high $80 range, and believe speculative investing is
the real culprit behind high oil prices. And as long as investors are
willing to keep buying, prices will keep rising.
"It still doesn't act like a market that has placed a high," said Jim
Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.
Also Tuesday, November gasoline rose 2.51 cents to $2.1826 a gallon on
the Nymex, while heating oil futures rose 2.86 cents to $2.3358 a
gallon. Natural gas for November rose 3.7 cents to $7.482 per 1,000
cubic feet.
In London, November Brent crude rose $1.54 to $84.29 a barrel.
Retail gas prices have not kept pace with oil's recent rally into record
territory, as many analysts had expected. At the pump, the average
national price of a gallon of gas rose 0.2 cent overnight to $2.759 a
gallon, according to AAA and the Oil Price Information Service. Gas
prices are 53 cents higher than a year ago, but have fallen over the
last month. That could change, however, now that oil is again on the rise.
"Consumers will now see higher prices at the pump in the coming months
and weeks," said John Kilduff, vice president of risk management at MF
Global UK Ltd.
Despite oil's gains, some analysts think domestic oil supplies are
rising. Analysts surveyed by Dow Jones Newswires, on average, expect the
Energy Department's Energy Information Administration to report
Wednesday that crude supplies grew by 1 million barrels last week.
Gasoline inventories are also expected to have grown by 1 million
barrels, while inventories of distillates, which include heating oil,
likely fell by 400,000 barrels.
Refinery activity likely rose by 0.4 percentage point to 88.2 percent of
capacity, the analysts predict.
___
Associated Press writers George Jahn in Vienna and Gillian Wong in
Singapore contributed to this report.