World oil prices hit $US86

[Pastor Dale Morgan]

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World oil prices hit $US86 *

From correspondents in New York

October 16, 2007 07:30am
Article from: Agence France-Presse

WORLD oil prices soared to record highs overnight with New York prices
smashing through $US86 as tensions mounted between Turkey's government
and Kurdish rebels located in northern Iraq.

Oil values jumped after Turkey's army said at the weekend that it had
shelled Iraqi territory following an attack on a military outpost with
rockets and gunfire from across the border by PKK rebels.

New York's main oil futures contract, light sweet crude for delivery in
November, soared a hefty $US2.44 to close at $US86.13 a barrel amid the
heightened tensions across the Turkish-Iraq border.

London oil prices also surged amid the concerns. Brent North Sea crude
for November delivery settled up $US2.20 at a record $US82.75 a barrel.

"The tensions on the Turkish-Iraqi border have really pushed the price
up," said Adrian Bingham-Walker at CMC Markets.

"It's a new supply threat and prices have just kept on hitting new highs
today. As it's hitting these highs, it's attracting more and more
buyers," Mr Bingham-Walker said.

Aside from the Turkish-PKK fears, oil prices have also been boosted by
worries over stretched global energy supplies.

Traders are fearful that heating fuel demand will soar during the
northern hemisphere winter, especially in the United States.

Oil prices spiked overnight as the Turkish government met to prepare a
motion seeking parliamentary approval for a potential military incursion
into neighbouring Iraq to crack down on Kurdish rebel bases there.

The motion will be sent to parliament "once it is signed by all the
ministers", a Turkish government official said.

The Turkish cabinet was expected to seek a one-year authorisation for a
military operation in northern Iraq, where an estimated 3500 rebels of
the separatist Kurdistan Workers' Party (PKK) are located.

Oil traders are concerned a worsening of the situation could affect
Iraq's oil market and wider crude markets as western governments appeal
for calm.

The White House urged "restraint" from Turkey.

"We urge the Turks to continue their discussions with us and the Iraqis,
and to show restraint from any potentially destabilizing actions," said
White House spokesman Gordon Johndroe.

Oil traders "are still worried about possible tension with Turkey and
Iraq on the northern borders", said Sucden analyst Robert Montefusco.

"It's being discussed in Turkish parliament at the moment over whether
it is legal for them to go and invade.

"There's no lost production at the moment, so it's only perceived that
we could lose some production if any of the pipelines are affected in
that region from Iraq," Mr Montefusco said.

"That is the main concern at the moment."

The Organisation of the Petroleum Exporting Countries (OPEC) meanwhile
forecast that 2007 world oil demand growth would stand at 1.3 million
barrels per day (bpd).

The estimate, contained in OPEC's monthly report for October, was
unchanged from the previous figure given in September.

The Vienna-based cartel said that demand for fuel and heating oil in the
fourth quarter to December "is forecast to be strong".

World oil demand growth during the period "is estimated to follow
typically high seasonal consumption (patterns) due to the expected
normal winter in the northern hemisphere", the report said.

OPEC pegged world oil demand growth at 1.8 million bpd for the last
three months of 2007.