Nuclear test fears force oil prices up
Oil prices climbed today fuelled by concerns at possible production cuts and worries over how global superpowers will react to North Korea’s nuclear weapons test.
In London, a barrel of crude rose 99 cents to $60.82, while in New York the price rose 71 cents to $60.47, as markets waited for a possible decision from OPEC on cuts in output.
The situation was not helped by the escalating tension in the Far East. North Korea is not a major oil producer or consumer, but there is concern over the global response to its weapons tests.
The AA Motoring Trust in the UK said the knock-on effect of rising oil prices is not likely to hit drivers at the petrol pumps just yet as supermarkets continue to lure customers with cheaper fuel.
Oil hit record highs of $78 a barrel during the recent fighting in Lebanon and fears of falling production at Prudhoe Bay, where British Petroleum (BP) was forced to slash its operations following a leak.
The price began to ease in the last few weeks as energy markets became less anxious over tensions in the Middle East and the US hurricane season failed to deal any serious blows to oil rigs in the Gulf of Mexico.
The price of a barrel of crude fell to a six-month low in London at the end of August to $59.41, while in New York it cost $58.68 – its lowest level since February.
However, the price crept back over the $60 mark today following reports a number of OPEC members are expected to cut production levels in a bid to stem a decline in prices since mid-July.
It comes after the US Energy Department reported that American stockpiles of crude oil stood at a healthy 324.8 million barrels, or 5% more than last year’s level, even after the US holiday period.
Reports have suggested a majority of OPEC states back a voluntary reduction following an announcement that Nigeria and Venezuela planned to cut back on production by a combined total of 170,000 barrels per day.
Bruce Evers, an oil analyst at Investec Securities, said the market should expect cuts in production, but thought they may come on an “informal basis” rather than an official OPEC announcement.
In London, shares in BP lifted 1.4%, or 8p, to 580.5p, while Royal Dutch Shell also enjoyed a boost, this time by 1%, or 17p, to 1785p. But companies dependant on oil did not fare so well following the price rise.
On the Irish Stock Exchage, budget carrier Ryanair fell 15c to €8.65.
In London, British Airways was down almost 2% – or 8.5p – at 429.75p, while cruise operator Carnival slipped 6p to 2588p and easyJet was down 4p at 491.75p.
