Oil prices set new records this week after Turkey warned that it might attack Kurdish separatist groups in Northern Iraq, a key emerging oil-producing area.
Cooler weather in the Northern US and a fresh political chill between Turkey and Iraq combined to drive crude oil prices into uncharted territory, above $86 a barrel. Low-sulfur West Texas Intermediate crude oil for delivery next month closed at a record of $86.13 a barrel on the New York Mercantile Exchange on Monday. The price rose $2.44 a barrel on the day, a gain of almost 3%. While crude is still below the inflation-adjusted record high set in 1981, the sharp rise and the setting of a nominal record helped to spook investors worried about inflation.
Turkey triggered the rally in oil prices by warning that it may attack Kurdish bases in northern Iraq, home of the world’s third-largest oil reserves. The OPEC added fuel to the rally by warning that crude oil production by non-OPEC nations would fall short of forecasts. “Surging oil prices are.....becoming more worrisome for stock traders,” analyst firm Lion said in a commentary yesterday. “High energy prices support the energy sector of the stock market but they are generally bearish since they divert business and consumer spending from other areas of the economy.” Refined oil products also jumped on the day.
US gasoline futures climbed almost 3.5%, for example, and heating oil futures rose 2.7%. Natural gas futures shot up even further, with one NYMEX contract soaring 6.6% on Monday. Spot prices for immediate delivery of gas, however, declined almost as much, suggesting ample supplies for now. (bi-me.com)