Oil hits new record above $92
Foreign Desk Report

LONDON—Crude oil prices spiked above $92 a barrel Friday on tensions in the Middle East and renewed concerns about supply.
The United States announced new sanctions against Iran on Thursday, targeting the elite Revolutionary Guards, which Washington accuses of backing Shiite militants in Iraq. A confrontation between the world’s largest oil consumer and its fourth largest oil producer could upend markets.
Parallel to fears of a broader conflict in the Middle East were new oil supply concerns.
Light, sweet crude for December delivery rose $1.20 to $91.66 a barrel in electronic trade on the New York Mercantile Exchange by afternoon in Europe. It briefly rose to a new trading record of $92.22 during Asian trading. With the recent gains, the price of oil is closing in on the inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
The Nymex crude contract jumped $3.36 on Thursday to settle at $90.46 a barrel — closing above $90 a barrel for the first time. “With oil taking the $90 hurdle, a price of $100 seems more and more likely, if only for speculative reasons,” Commerzbank commodity analyst Eugen Weinberg told Dow Jones Newswires.
December Brent crude rose 97 cents to $88.45 a barrel on the ICE futures exchange in London, down from an earlier high of $89.30. “The market is really quite worried about supply,” said Tetsu Emori, commodity markets fund manager at ASTMAX Futures Co. in Tokyo. “Oil is quite imbalanced. It is quite tight.” The combination of supply worries and geopolitical concerns has pushed crude oil prices up more than 7 percent since Tuesday. Prices first jumped sharply Wednesday after the Energy Information Administration reported that U.S. oil inventories fell 5.3 million barrels last week when analysts had expected them to grow 300,000 barrels.
That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.
Analysts said that while prices for products like heating oil and gasoline were not rising as fast as crude prices, they could be expected to mimic the trend.
“It’s not a barrel per barrel increase, and it could increase slightly less than crude but (heating oil) prices will follow the direction,” said Olivier Jakob of Switzerland’s Petromatrix.
Nymex heating oil futures rose 1.91 cents to $2.4275 a gallon, while gasoline prices added 2.26 cents to $2.2584 a gallon. November natural gas futures fell 4.6 cents to $7.142 per 1,000 cubic feet. On Thursday, Organization of Petroleum Exporting Countries Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. The comments counter rumors that Saudi Arabia is pushing for another production increase after pressuring the group into one of similar size that goes into effect Nov. 1.
Energy traders also remain concerned a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq. Turkey has warned it will decide whether to cross into Iraq in pursuit of Kurdish guerrillas regardless of U.S. objections, and U.S.-made Turkish fighter jets patrol the skies near the Iraqi border. Turkish artillery has been periodically firing across the border, and Turkish television showed video of smoke rising from three villages in northern Iraq that were purportedly hit by shells Thursday.
Lebanese troops fired on Israeli warplanes Thursday, and while a conflict between Israel and Lebanon would not directly affect oil supplies, traders worry that any hostilities in the Middle East would draw in oil producers such as Saudi Arabia and Iran.
On Friday, gunmen in speedboats attacked an oil vessel off the coast of Nigeria at dawn and kidnapped six workers, Italian energy giant Eni SpA said.
Traders were also watching storms form near the Gulf of Mexico, where there are major oil operations. Oil rallied to a fresh record high above $92 a barrel on Friday as the dollar tumbled to a record low, Washington imposed new sanctions on Iran and gunmen shut more oil production in Nigeria. Oil’s bullish momentum has pulled in increasing amounts of speculative investment and waves of technical buying have been triggered as U.S. oil pierced successive lines of resistance.
At 11:07 a.m. EDT U.S. crude was up 74 cents at $91.20, off a record $92.22. It is closing in on its inflation-adjusted high of $101.70 seen over the course of April 1980, a year after the Iranian revolution and at the start of the Iran-Iraq war. London Brent was up 72 cents at $88.20. Institutional money has been flooding into oil and other commodities since the U.S. Federal Reserve cut interest rates in August. “It’s more or less nobody wants to be short in this market,” said Markus Mezger, who manages investment portfolios at commodities hedge fund Tiberius.
But sentiment is now overheated and the supply/demand picture is not so supportive.
“We don’t find that prices are supported fundamentally above $80,” Mezger said. “On the demand side, the world economy might not be in such a good shape,” he said. “Supply is increasing from OPEC from November on and we think there might be a second decision to increase output again.”
This might tip the balance of the global oil market into a small surplus for the fourth quarter, he said. On Thursday the United States placed new sanctions on Iran, the world’s fourth-biggest oil exporter, and accused its Revolutionary Guard of spreading weapons of mass destruction. Iran is at odds with the United Nations over its nuclear programme.—Agencies