Oil prices rise on heightened tensions
NEW YORK -- Crude oil rose above $86 a barrel for the first time in New York on concern Turkish forces may pursue Kurdish militants in Iraq, curbing shipments as refiners prepare for the peak-demand heating season.
Prices climbed as much as 3 percent because Turkey's military may attack Kurdish bases in Iraq, which has the world's third-largest oil reserves. Futures also increased after the Organization of Petroleum Exporting Countries said production outside the group will be lower than previously forecast.
"Everything imaginable is going wrong as far as the oil market is concerned," said Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washing ton, D.C. "Turkey is saber rattling, Iraq isn't calming down, Iran is also saber rattling and supplies are tight."
Crude oil for November delivery rose $2.44, or 2.9 percent, to settle at a record $86.13 a barrel Monday on the New York Mercantile Exchange. During the day, oil reached $86.22, the highest since the contract was introduced in 1983. This is the fifth straight rise. Prices are 47 percent higher than a year ago.
Monday's intraday high passed the previous all-time inflation-adjusted record reached in 1981 when Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.
Turkey's government will ask lawmakers to approve legislation to launch attacks on bases of the Kurdistan Workers' Party. The resolution, which requires the backing of a simple majority of legislators in Turkey's 550-seat parliament, is also supported by the main opposition parties.
Crude-oil and other commodities also rose because the U.S. dollar declined against the euro, enhancing their appeal as an investment.
"It's going to soon hit $90 and go north of $100 next year," said Peter Schiff, chief executive officer of Darien, Conn.-based brokerage Euro Pacific Capital, with $700 million in customer accounts. "We should see $150 to $200 oil in the next two to three years because of the drop in the dollar. Once Asian countries allow their currencies to appreciate, demand will explode there."