Oil prices reach new 10-year highs
The price of benchmark Brent North Sea crude oil climbed to 34.80 dollars a barrel in London on Monday, the highest level since prices breached 40 dollars a barrel during the 1990 Gulf War.
Oil prices rose to a series of new 10-year highs during the day, despite having fallen back last week after a pledge by the Organisation of Petroleum Exporting Countries (OPEC) to pump more oil if needed into the market.
Prices surged again after tensions flared between Iraq and Kuwait over a territory dispute last Thursday, when Iraq accused its southern neighbour of stealing oil from two fields close to their border, the alleged reason for the Iraqi invasion of Kuwait in 1990.
Analysts said earlier in the day that the possibility that Iraq would cease pumping oil in protest was partly responsible for surging oil prices, and that weak trading had amplified the movement.
While Iraq was unlikely to invade Kuwait again, given the US presence there, the threat that it would halt production in protest posed a real risk, analysts said.
The surge in oil prices was also partly a result of fading prospects that the United States would intervene to bring prices down, said Peter Gignoux of Salomon Smith Barney.
"The market had anticipated the opening of strategic reserves, which did not happen," said Gignoux.
The US Strategic Petroleum Reserve (SPR) allows Washington to stock oil for release in response to crises.
But analysts said that even if the US government did agree to pump its reserves, any downward effect on prices would be short-lived.
According to Tony Machacek at Prudential Bache brokerage: "Even if the US released some of the SPR, I don't think it would have a long-lasting effect on prices."
The prospect of a return to the 40-dollar barrel this winter is becoming less far-fetched by the day, and analysts remained unconvinced that the OPEC promise to increase production by 800,000 barrels a day from October 1, and by more if necessary, would be sufficient to cool an overheating market.
A return to 40 dollars a barrel "is certainly possible," said Machacek. "Generally, the market is in that mood."—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)