Oil prices slip after striking record $89

LONDON—World oil prices slid Thursday, one day after hitting a record high 89 dollars per barrel, as traders absorbed rising US energy reserves and geopolitical tensions in the crude-rich Middle East.
New York’s main futures contract, light sweet crude for delivery in November, shed 15 cents to 87.25 dollars a barrel, after hitting an historic 89.00 dollars exactly on Wednesday. Elsewhere Thursday, London’s Brent North Sea crude for December delivery recoiled 22 cents to 82.91 dollars. The November contract had expired Tuesday after striking an all-time high of 84.49 dollars per barrel.
This week, prices blazed a record-breaking trail towards 90 dollars in New York as traders seized on simmering tensions along the Turkey-Iraq border. But crude futures finished lower Wednesday on profit-taking after a stronger-than-expected US energy stockpiles report offset geopolitical worries surrounding oil exporters Iraq and Iran.
The price of Brent oil has leapt by more than 10 percent in the last eight trading days, while New York crude has rocketed by 12.5 percent in value. Iraq’s Kurdish administration called Thursday for direct negotiations with Ankara as thousands of fearful Iraqi Kurds took to the streets to protest against the Turkish military threat.
“Despite the green light for possible military action, it is not certain when or whether the Turks will go in, and there is frantic diplomacy going on in order to dissuade them from doing so,” said MF Global analyst Edward Meir. The Turkish parliament has adopted a resolution authorising its military to cross into Iraq to crack down on rebels from the Kurdistan Workers’ Party in the region.
Market participants are on edge over the issue because northern Iraq is home to some of the troubled country’s largest oil fields. Traders are also jittery about tight global energy supplies, particularly during the northern hemisphere winter when demand surges for heating fuel.
However, the US Department of Energy said Wednesday that American crude reserves jumped 1.8 million barrels in the week ending October 12. Stockpiles of distillates, which include diesel and heating oils, leapt by 1.0 million barrels.
“The bearish numbers were partly offset by yet another drop in refinery utilization rates, reminding participants that refineries are still thinly stretched going into the winter,” added Meir. Prices had also spiked Wednesday after US President George W. Bush reignited market concerns over the Iranian nuclear crisis.
Highlighting the uncertainties in the Middle East, Bush said he had warned world leaders they must prevent crude producer Iran from getting nuclear weapons “if you’re interested in avoiding World War III.”
Petromatrix analyst Olivier Jakob said that the comments added a “fear factor” premium to the price of crude oil. “The fear factor is not something that can be fully discounted when the French foreign minister talks of the war with Iran, or when president Bush mentions ‘World War III’ if Iran gets the A-Bomb,” Jakob said. “These statements are part of the psychological warfare between the US and Iran but translate to an additional risk premium into oil futures”.—Agencies