Crude oil futures rose to a record in New York on concern Iraqi exports may drop because of clashes in southern Iraq between U.S. troops and fighters loyal to Shiite Muslim cleric Moqtada al-Sadr. Violence in Iraqi has cut the nation's exports to about 1 million barrels a day from 1.8 million in April. Futures have set records all but one day since July 30 on concern global demand will exceed supply. OPEC, which supplies a third of the world's oil, said Wednesday its members are pumping as much as they can.
``This market is just ratcheting up every day,'' said Chris Mennis, owner of New Wave Energy in Aptos California. It's being fueled by concerns OPEC may not have enough barrels to meet fourth-quarter demand, he said. Crude oil for September delivery rose as much as 28 cents, or 0.6 percent, to $48.98 a barrel in electronic after-hours trading on the New York Mercantile Exchange at 10:49 a.m. Singapore time. That's the highest intraday price since oil began trading in New York in 1983. September crude yesterday rose $1.43, or 3 percent, to $48.70 a barrel, a record closing price.
September Expiry
Recent gains are being compounded as traders try and buy back contracts they hold to sell oil at lower prices before the September contract expires at the end of the day, Mennis said. September crude closed $1.06 higher than the October contract yesterday, almost three-times the 36 cent-margin on Monday. That margin may swell to $1.25 by the end of the day, Mennis said. ``The only sellers are going to be people who have oil for delivery and we know there aren't many of those,'' Mennis said. Crude for October delivery rose $1.29, or 2.8 percent, to close at $47.64 a barrel yesterday. It traded at $47.86 a barrel at 10:26 a.m. Singapore time.
The Organization of Petroleum Exporting Countries on Wednesday raised its forecast for fourth-quarter demand by 300,000 barrels a day, or 0.4 percent more than it expected last month. Members may pump 30.5 million barrels a day in September, 930,000 more than in July, to prevent shortages and refill inventories, the group said in a monthly report. ``The oil price is firmly in the danger zone,'' Stephen Roach, chief economist at Morgan Stanley in New York, wrote in a note to clients. Should prices reach $50 and stay there for several months, this would be ``in the ballpark with full-blown oil shocks of the past'' that have caused recessions, he said.
Real Prices
The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department. That's almost equivalent to $73 in 2004 dollars. Those gains came in the aftermath of the Arab oil embargo in 1974 that followed the Arab- Israeli war of 1973. ``Rising prices are being supported by the reduction in Iraqi exports and the threat that al-Sadr's aide made to torch the country's oil infrastructure,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``The upward momentum in prices shows no sign of lessening.'' Iraq is exporting about 1 million barrels of oil a day since closing one of the two pipelines that connect its southern fields to its Persian Gulf terminals, the head of the country's State Oil and Marketing Organization, SOMO, said Wednesday. Exports won't recover until security improves, Dhia Al-Bakka, Iraq's OPEC governor and director-general of SOMO, said in an interview in Vienna.
Iraq Prime Minister Ayad Allawi yesterday issued a ``final call'' to al-Sadr to disarm his militia and end a two-week uprising in Najaf. Al-Sadr refused to do so, Agence France-Presse reported.
Oil Attacks
Militants loyal to al-Sadr yesterday broke into the headquarters of Iraq's South Oil Co., burning down at least 10 warehouses and the company's offices, Associated Press reported. Several oil pipelines in southern Iraqi have been set on fire and threats were made to torch oil wells across Iraq, Agence France-Presse reported, citing an al-Sadr aide interviewed on Al- Jazeera television. Crude oil prices include a premium for terrorism risks, which may be as high as $10 a barrel, New Wave's Mennis said. Capturing al-Sadr would be a significant victory for the new Iraqi government and would reduce that premium, he said. ``If they get Sadr the market will sell off. I don't know by how much but it will sell off,'' Mennis said. Prices in New York have surged 69 percent since coalition soldiers helped Iraqis topple Saddam Hussein's statue in Baghdad on April 9, 2003. The continued presence of about 140,000 U.S. military personnel in the nation that holds the world's third- largest oil reserves has failed to stop pipeline attacks.
Yukos
Oil has also risen the eight weeks since OAO Yukos Oil Co., Russia's biggest oil exporter, said it may be bankrupted by a $3.4 billion tax bill. The company has struggled to fund operations after the Russian government froze accounts that handle about 50 percent of the company's monthly $1.8 billion in cash flow. Yukos pumps about 1.6 million barrels of oil a day, about as much oil as OPEC member Libya. September crude rose more than 1 percent Wednesday after the U.S. Energy Department said the country's crude oil stockpiles fell by 1.3 million barrels to 293 million in the week ended last Friday despite a 9 percent rise in imports. Gasoline demand rose to its highest in a year. ///www.bloomberg.com