Pakistan unrest lifts oil prices
Foreign Desk Report

LONDON—Oil prices rose solidly on Monday, pushed higher by concerns about instability in Pakistan and tensions on the Turkish border with oil-rich Iraq, dealers said. The mass unrest in Pakistan following the assassination of opposition leader Benazir Bhutto last week was leading traders to price in a risk premium, they said.
New York’s main contract, light sweet crude for February, gained 50 cents to 96.50 dollars per barrel in light trading ahead of the New Year. In London, Brent North Sea crude for February delivery shot up 1.14 dollars to 95.02 dollars.
On Friday, the New York contract had struck a one-month high of 97.92 dollars, coming close to the record peak of 99.29 dollars reached on November 21. New York prices had briefly approached 98 dollars late last week after the assassination of Bhutto, before slipping on profit-taking.
“Further unrest, which looks inevitable at this stage, could keep energy prices well bid over the short-term,” said Ed Meir, an analyst at MF Global. Owing to the unrest, upcoming elections in Pakistan would be delayed by at least four weeks, a cabinet official told AFP on Monday.
Other government and election officials confirmed that the January 8 polls would be postponed. “Political unrest around the world has once again become a major factor” for the oil market, said David Johnson, an analyst with Macquarie Securities.
Tension along Turkey’s border with northern Iraq has added to concerns about geopolitical instability, Johnson added. Turkey said Friday it would continue its military operations against the Kurdistan Workers’ Party (PKK). The army says it has launched three cross-border bombing raids and killed more than 160 rebels since December 16.
From a low point of just below 50 dollars in January, oil prices doubled in 2007. Prices are also being supported by lingering concerns about supply during the current northern hemisphere winter. Analysts are forecasting oil to break through 100 dollars in 2008 as crude faces strong demand and tight supplies amid robust economic growth in China and tensions in oil-producing regions. “The oil market remains very tight,” Sucden analyst Michael Davies noted on Monday.
Oil prices rose Monday due to instability in Pakistan and on the Turkish border with Iraq, heading towards 100 dollars per barrel again on the last trading day of the year, dealers said. New York’s main contract, light sweet crude for February delivery, was 35 cents higher at 96.35 dollars per barrel.
The contract had briefly approached 98 dollars on Friday, a one-month high, after the assassination of Pakistani opposition leader Benazir Bhutto, before falling back due to profit-taking. Oil prices have roughly doubled in 2007 from a low point of just below 50 dollars in January, with some analysts predicting a price of 100 dollars or higher during 2008.
Dealers said a US report last week showing a higher-than-expected drop in US crude stockpiles had also supported prices, which are still within sight of the all-time record of 99.29 dollars per barrel reached in November.
Brent North Sea crude for February delivery was 41 cents higher at 94.29 dollars per barrel. It hit a one-month peak, 95.86 dollars, in London on Friday and achieved its all-time high of 96.53 dollars in November.
Dealers said Bhutto’s killing, which plunged Pakistan into crisis and sparked global condemnation, would have a psychological impact on the market even though the country is not an oil producer.
“Political unrest around the world has once again become a major factor,” said David Johnson, an oil analyst with Macquarie Securities in Hong Kong. Tension along Turkey’s border with northern Iraq has added to concerns about geopolitical instability, Johnson said.
Turkey said Friday it would continue its military operations against members of the Kurdistan Workers’ Party (PKK). The army says it has launched three cross-border bombing raids and killed more than 160 rebels since December 16.