Sun, May 12, 2002 - Page 10 News List

Crude oil rises to eight-month high on Israeli violence


Crude oil rose to an eight-month high, as Israeli preparations for a retaliatory strike against the Palestinians for a suicide bombing on Tuesday renewed concern that supplies from the Middle East might be disrupted.

Israel has been expected to hit Palestinian targets in the Gaza Strip in response to the bombing that killed 15 Israelis.

Last month Iraq halted oil exports for 30 days to protest Israel's occupation of Palestinian territory on the West Bank. Export operations resumed yesterday, according to Iraqi officials.

Any mistakes by the Israelis "could further enrage the Arabs," said Michael Fitzpatrick, a futures broker at Fimat USA Inc in New York. "It's a risky time. A great deal could change over the weekend."

Crude oil for June delivery rose US$0.31, or 1.1 percent, to US$27.99 a barrel on the New York Mercantile Exchange, the highest closing price since Sept. 17. Prices, which have risen 41 percent this year, were up 5.1 percent this week.

In London, the June Brent crude-oil futures contract rose US$0.44, or 1.7 percent, to US$26.38 a barrel on the International Petroleum Exchange. Prices were up 2.4 percent this week.

Israeli tanks and bulldozers entered the Gaza Strip town of Rafah as the army massed troops on the Gaza border in preparation for an attack, the Israeli daily Ha'aretz reported.

"Obviously, there's a Middle East crisis premium in all crude-oil prices around the world," Federal Reserve Chairman Alan Greenspan said in Chicago. "Obviously, we are potentially vulnerable."

Arab producers, with the exception of Iraq, haven't restricted supplies for political reasons since the oil crisis of 1973, when Saudi Arabia and other states cut off exports to the US because of its support of Israel.

"Oil is a vital commodity and markets have to factor in even an outside chance" of an embargo, said Jim Steel, a director of commodity research at Refco Inc in New York. "In the past, there have been oil stoppages that have hurt. You don't know how the situation in the Middle East will be resolved, so you try to anticipate every possible outcome."

Arab oil producers meeting in Cairo this weekend may debate whether to place an embargo on exports in retaliation for an Israeli attack on Palestinian targets.

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