Oil price just shy of $US40
www.heraldsun.news.com.au This story is from our news.com.au network Source: AFP 28feb03
OIL prices have rocketed up to almost $US40 ($65.90) a barrel in New York for the first time since the 1990-91 Gulf War. Benchmark light sweet crude for April delivery surged more than $US2 to $US39.99 in late morning trade, a level not seen since October 1990 in the wake of the Iraqi invasion of Kuwait.
It later fell back to $US39.25 a barrel, still up $US1.55 from the previous close.
Traders chased prices higher on fears that a war in Iraq could be just around the corner, threatening disruption to Middle East supplies, while US oil stocks are close to a 27-year low.
"A potentially supply-disruptive war may begin at any moment," said Mike Fitzpatrick, an oil trader at Fimat USA in New York.
The price of reference London Brent North Sea crude for April delivery rose to $US33.20 in late trading from $US33.07 at the close of the previous session.
"Crude oil inventories remain about as low as they possibly can be in the States and then you throw in on top of that the geopolitical concerns and you've got the recipe for crude moving up towards $US40," said JP Morgan analyst Paul Horsnell.
"In terms of the key oil products, we're just running out."
Analysts said the decision taken last month by the Organisation of Petroleum Exporting Countries (OPEC) to pump more oil to compensate for a strike in Venezuela had come too late too quell a price spike.
"We had always warned that the market was on a knife-edge: additional crude supplies were expected to arrive in the coming weeks, but it was unclear whether they would arrive in time to prevent a squeeze in prices," said GNI-Man Financial analyst Lawrence Eagles.
"They did not. The squeeze is now well and truly under way, underpinned by cold weather demand and a surge in natural gas prices."
The market found little solace in comments from the OPEC oil cartel reassuring consumers it had four million barrels of spare capacity available to avert supply shortfalls and would not use oil as a weapon if war broke out against Iraq.
OPEC Secretary General Alvaro Silva Calderon "talked about having 4 million barrels a day of spare capacity and nobody really believes that", said Horsnell.
"I think JP Morgan is more optimistic than most on how much spare capacity there is within OPEC and we don't think there's much more than two (million bpd) left and there are others who have lower numbers than that.
"There's not really an awful lot the OPEC secretary general can say at this point to drag things down too quickly."