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New York crude surges beyond US$83

New York crude oil prices jumped to a record close above US$83 on Friday amid increasing tensions between Turkey and Kurdish rebels in Iraq, traders said.

The autonomous Kurdish regional government in northern Iraq has warned Turkey against making good on its threat to mount a cross-border incursion to flush out suspected rear-bases of the rebel Kurdistan Workers' Party (PKK).

The tensions saw New York's main oil futures contract, light sweet crude for delivery in November, close up US$0.61 at a record closing high of US$83.69 a barrel.

The contract had earlier soared to US$84.05, US$0.05 off its historic intraday peak, which was also struck last month.

Brent North Sea crude surged to US$80.87 a barrel in earlier trading, just below its all-time record high of US$81.05 reached last month, before settling up US$0.40 at US$80.55.

"The reason the market is strong is concern over increasing tensions between Turkey and the Kurds," Alaron analyst Phil Flynn said.

Ankara charges the PKK has used bases in northern Iraq to launch a renewed offensive inside Turkey that saw 15 soldiers killed at the weekend.

Oil prices had begun spiking Thursday after the US Department of Energy (DOE) said US crude reserves slumped by 1.7 million barrels in the week to Oct. 5. Market expectations had been for a 1-million-barrel gain.

The DOE added that US distillates, which include heating fuel, slid by 600,000 barrels, which was broadly in line with market expectations for a 775,000-barrel drop.

This week, the oil market has swung between losses and gains as sentiment was swayed by supply concerns and the flagging US dollar.

Prices slumped by more than US$2 on Monday as the US dollar rose against the euro. A stronger US unit makes commodities priced in dollars more expensive for buyers using other currencies, and therefore weakens crude demand.

However, oil prices have since rebounded on renewed concerns over the strength of global supplies going forward, while the dollar also resumed its downward trend against major rival currencies.

Traders are worried about tight heating fuel supplies ahead of the approaching winter months in the northern hemisphere.

The prospect of lower US interest rates, which could increase global crude demand by stimulating the world's biggest economy and energy consumer, has also supported gains.

Meanwhile, the International Energy Agency (IEA), the developed world's energy watchdog, this week held steady its forecasts for oil demand for this year and next.

The IEA predicted average oil demand to be 85.9 million barrels per day this year and 88 million bpd next year.

World oil supply increased by 415,000 bpd last month from August owing to higher output in North America, China and from OPEC members, averaging 85.1 million bpd, the watchdog said in its monthly report.
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