Oil prices surge beyond $90
Foreign Desk Report

LONDON—Oil surged beyond $90 to a new peak on Friday as tight fuel stocks ahead of winter and a softening dollar spurred investor buying.
U.S. crude gained 33 cents to $89.80 a barrel by 6:43 a.m. EDT, having hit an all-time high of $90.07 minutes earlier. London Brent crude edged down 6 cents to $84.54.
Oil’s rally — which has seen six straight days of record highs for U.S. crude — has been fuelled by unprecedented weakness in the dollar, a factor that has supported all dollar-denominated commodities. The greenback fell to a new record low against the euro on Friday, knocked by sentiment that weak U.S. economic and financial market indicators may force another interest rate cut.
“The dollar weakened further, spurring some investment into oil as a hedge against dollar weakness,” said David Moore, commodity strategist from the Commonwealth Bank of Australia. “And there are still concerns that oil market conditions will remain tight over the northern winter.”
Oil has averaged just over $67 a barrel this year, but is climbing towards the inflation-adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution.
The price run-up has concerned OPEC, which may call for an early formal meeting to discuss a further output increase. An OPEC supply rise of 500,000 barrels per day (bpd), agreed last month, will take effect on November 1. Although stocks of fuel in top consumer the United States rose last week, crude inventories stand about 4 percent below a year ago, while gasoline and distillate stocks are about 7 percent below last year. Rising political tension between Turkey and Kurdish rebels in northern Iraq has also supported gains, as traders worry about a disruption in flows of Iraq’s northern oil exports.
On Friday, oil also moved higher on continued worries over tensions between Turkey and Kurdish rebels in northern Iraq. A barrel of light, sweet crude passed $90 per barrel in European trading before retreating, and was last up 33 cents at $89.80 on the New York Mercantile Exchange.
Investors also looked toward another batch of earnings reports, including disappointing results from Caterpillar Inc., 3M Co. and Xerox Corp. Technology stocks showed more-modest declines after Google Inc. reported stronger-than-expected profits, and prompted a number of analyst upgrades. In the first hour of trading, the Dow Jones industrial average fell 118.28, or 0.85 percent, to 13,770.68.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 11.46, or 0.33 percent, to 1,528.62, and the technology-heavy Nasdaq composite index dropped 18.77, or 0.67 percent, to 2,780.54.
Friday’s early pullback pales in comparison to what traders on the floor of the New York Stock Exchange had to contend with exactly 20 years ago. On Oct. 19, 1987 — a day still known as Black Monday — the Dow plunged 23 percent on concerns about interest rates and slowing economic growth.
Bonds rose again Friday, extending a rally to five sessions. The yield on the benchmark 10-year Treasury note fell to 4.47 percent from 4.50 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
In corporate news, Caterpillar, one of the world’s largest construction equipment makers, posted a 21 percent increase in its third-quarter earnings. However, the company’s results fell short of Wall Street’s expectations and the company lowered its full-year forecast. Caterpillar, one of the 30 stocks that comprise the Dow industrials, fell $2.55, or 3.3 percent, to $75.11.
3M, the maker of Scotch tape and Post-It Notes, said quarterly profit jumped 7 percent on strong growth across all regions, but sales missed expectations. The company raised its profit outlook for the full year. The stock fell $2.96, or 3.1 percent, to $91.77.
Xerox, the world’s biggest supplier of office printers and copiers, slipped 12 cents to $17.09 after posting better-than-expected quarterly earnings. The company said equipment sales rose 14 percent from the year-ago period. Wachovia Corp. fell 87 cents to $47.27 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation’s fourth largest bank also signaled increasing credit troubles ahead. Google rose $13.27, or 2.1 percent, to $652.89 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.