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Monday, 29 October 2007

Oil Prices top $93

Oil prices hit a new trading high above $93 a barrel Monday before falling back, propelled by news that Mexico’s state oil company was suspending about a fifth of its oil production due to a storm.

The news that Petroleos Mexicanos, or Pemex, was to stop as much as 600,000 barrels of daily crude production came amid political tensions in the Mideast, a weak U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices.

The Pemex shut-in “is the one that has pushed prices above $93,” said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz. “This is on top of what has already been simmering.”

Pemex announced Sunday that it had already suspended 200,000 barrels of daily production in the Gulf of Mexico because of bad weather and was planning to reduce by another 400,000. Pemex produces about 3.2 million barrels of crude oil a day, of which 2.7 million come from the Bay of Campeche in the southern Gulf.

In addition, Vienna’s PVM Oil Associates noted that “more bad weather could hit the region in the form of Tropical Storm Noel.”

Light, sweet crude for December delivery rose as much as $1.34 to $93.20 a barrel, a new intraday record, in early afternoon Asian electronic trading on the New York Mercantile Exchange. By afternoon in Europe, it had slipped back to $92.26 a barrel.

That was still up 40 cents from Friday’s record close of $91.86 a barrel. The previous trading high was $92.22 a barrel, set Friday.

Oil futures have gained almost $8 a barrel, or 9 percent, since the U.S. Department of Energy reported last Wednesday a sharp drop in the country’s crude stocks.

“The strong price is due to supply concerns in general, on top of which we have the geopolitical news,” Shum said.

A rumbling of tensions in the Middle East and elsewhere last week already had traders worried about the disruption of oil exports.

A sharp escalation in fighting between Turkey and Kurdish rebels has brought Turkey to the brink of sending troops south across the border into Iraq, and the United States last week announced harsh penalties against Iran — the world’s fourth largest oil producer — in hopes of raising pressure on the world financial system to cut ties with Tehran.

Also, last Friday, gunmen in speedboats kidnapped six workers from an oil vessel off Nigeria’s coast, the second attack on an oil field there in a week. Nigeria is Africa’s largest oil exporter and the fifth-largest supplier of crude to the United States.

A weak dollar continues to be a factor in driving oil prices as well.

The dollar’s descent against major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.

Analysts note the price of oil is closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.

In London, December Brent crude advanced 39 cents to $89.08 a barrel on the ICE futures exchange.

Heating oil and gasoline futures rose just over a penny to $2.445 a gallon and $2.2850 per gallon.

Natural gas futures gained nearly 11 cents to fetch $7.325 per 1,000 cubic feet.

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