Oil Prices Set Another Record,
As Iraq Clashes Stoke Supply Fears
By MASOOD FARIVAR
DOW JONES NEWSWIRES
August 13, 2004
NEW YORK -- Crude-oil prices soared, extending a push into record territory on fear that heavy fighting in southern Iraq could lead to a disruption in oil supplies.
At the New York Mercantile Exchange, crude-oil futures for September delivery rose 70 cents to settle at a record of $45.50 a barrel, after rising as high as $45.75 earlier in the session. Yesterday's record marks the seventh new settlement high in three weeks.
U.S. forces launched a full-scale assault on the Iraqi shrine city of Najaf to crush a weeklong uprising by militiamen loyal to Shiite cleric Muqtada al-Sadr.
Sadr loyalists have threatened to blow up oil pipelines and port infrastructure if an offensive is launched on the shrine itself in Najaf. A similar threat Monday caused oil officials to briefly stop pumping from Iraq's southern oil wells. Iraq exports 1.7 million barrels of oil a day, about 2% of daily global consumption.
Periodic curtailments in Iraqi supplies and fear of a wider disruption in the Middle East have been a driving force behind a 40% rise in oil prices this year. More recently, concern about the future of embattled Russian oil producer OAO Yukos and instability in oil-rich Venezuela have added to market jitters.
Meanwhile, the Organization of Petroleum Exporting Countries, responsible for more than a third of the world's output, is pumping nearly flat out to meet global oil demand.
With little spare room remaining in OPEC's capacity, "the world cannot afford" another interruption in Iraqi supplies, said Fadel Gheit, market analyst at New York brokerage house Oppenheimer & Co. "The situation in Iraq is really getting worse, and the threat of a supply disruption is very serious."
With supply fears growing, crude futures are likely to continue to move higher, said Peter Beutel, an analyst at Cameron Hanover, a trading advisory firm in New Canaan, Conn. "A lot of people feel this is as bullish a market as we have ever had," Mr. Beutel said. "Fifty dollars is acting like a magnet. A lot of people are talking about it."
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