Last week, Saudi Arabian Oil Minister Ali al-Naimi sought to calm concern about a lack of supply, saying the kingdom has 1.3 million barrels a day of spare production ready for use. Al-Naimi's statement was discounted by traders and prices rallied amid strife in Iraq. The extra barrels Saudi Arabia is offering are less-desirable heavy crude oil.
Losing Grip
"World price-setting ability appears to have slipped from Saudi oil minister al-Naimi to al-Sadr" in Iraq, Szabo said.
Prices surged in May and June on concern about Saudi Arabian supplies after attacks on foreign workers who help run the nation's oil industry. About 100,000 Westerners are employed in the kingdom. Saudi Arabia is the world's biggest oil exporter. The al-Qaeda terrorist network said it was behind some attacks in the kingdom.
"I can't imagine that the current tightness in the market has escaped the attention of al-Qaeda," said Chuck Hackett, a broker and analyst at Access Futures & Options Trading, a commodity futures brokerage in Woodlake, California.
"There can be little doubt that they are doing whatever they can to put together something that will hit some kind of oil jugular somewhere."
Dissenting Views
`There's too much hype in the oil market,'' said George Gaspar, an energy analyst with Robert W. Baird & Co in Milwaukee.
"Unless there is an outage beyond Iraq's export slowdown, oil supply is building. OPEC's higher September output target and non-OPEC supply recovery and growth should help put some added crude supply in the market."
US crude oil and petroleum product supplies exceed year-ago levels. Oil inventories of 293 million barrels last week were 5.1 percent higher than a year earlier, according to an Energy Department report.
"Prices are more than 50 percent higher than a year ago with inventories that are above last year's level," said Tim Evans, a senior energy analyst for IFR Markets in New York.
"This is a bubble that may float somewhat higher, but is already running a grave risk of collapse. The reversal may arrive without warning."
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