New high for oil prices
Oil prices soared to a new high today as spiralling tensions on the border between Turkey and northern Iraq added to concerns over winter supplies.
The cost of light, sweet crude for November delivery jumped to nearly $85 US dollars a barrel – a new high – in trading in New York, building on highs seen last week on the back of disappointing inventory figures.
The record comes as Turkey’s leaders seek parliamentary approval for military action against Kurdish rebels who operate from bases in northern Iraq. The region has the world’s third largest oil reserves.
Additionally, a US energy report last week revealed an unexpected fall in crude stockpiles ahead of the key winter months, while the International Energy Agency added to uncertainties after it said oil stocks held by the world’s biggest industrialised countries have fallen to a five-year low.
Keith Morris, oil analyst at Evolution Securities, said: “Data on inventory levels in the US showed an unexpected drop in oil inventories when most people expected them to go up. This is leading to concerns that demand for oil is not slowing down ahead of winter.
“There is also an underlying level of political uncertainty built into the oil price. While the supply and demand balance remains tight, political unrest increases people’s nervousness and continues to drive prices in an upward direction.”
On Friday, Turkish prime minister Recep Tayyip Erdogan said Turkey would brave any consequences from the international community if it decides to take military action against Kurdish rebels.
The geopolitical conflict has led to fears of substantial risks to Mediterranean oil supplies.
US secretary of state Condoleezza Rice has urged restraint, but relations between Turkey and the US became stretched after a committee passed a resolution last week labelling the killing of Armenians by the Ottomans between 1915 and 1917 as genocide – a claim Turkey disputes.
The weak dollar has also contributed to the rise in oil prices in the past month as investors turn to commodities such as oil and gold as alternative investments.
Oil prices have been buoyed by the hurricane season in the Caribbean and the United States.
While the prospects of a giant storm have dropped back, October remains the third busiest month for hurricanes and some uncertainty still underpins the recent cost rises.
