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Supply jitters drive oil to new high beyond US$90

Oil prices soared to another record high above US$90 per barrel yesterday amid global supply jitters and tensions between Turkey and crude producer Iraq, dealers said.

New York's main futures contract, light sweet crude for delivery in November, touched US$90.07 per barrel in early afternoon deals. That beat the previous high of US$90.02 set late on Thursday.

London's Brent North Sea crude for December delivery was flat at US$84.60 after hitting a record US$84.88 on Thursday.

"Persistent geopolitical fears provide good support to oil prices," analyst Andrey Kryuchenkov at the Sucden brokerage in London said.

This week, red hot crude prices have blazed a record-breaking trail as Turkey has moved closer towards a military incursion into northern Iraq -- where many of the troubled country's largest oil fields are based.

Iraq's Kurds yesterday vowed to fight off any attack on their region as pressure mounted in Baghdad and Washington for action against Kurdish rebels to stave off a potential Turkish incursion.

Falling dollar

The market was also fretting over the falling US dollar. A weak greenback makes commodities priced in the US unit cheaper for buyers using stronger currencies and therefore boosts crude demand, analysts say.

In morning trading yesterday, the European single currency hit a fresh record high at US$1.4319.

Prices were "still underpinned by a weakening dollar and tight fuel supplies ahead of the winter heating season," Kryuchenkov said.

Demand for heating fuel hits a peak during the northern hemisphere winter and supplies are widely expected to tighten.

Turkey has said it will pursue diplomacy to defuse the crisis over Kurdish rebels in northern Iraq while Baghdad has tried to dissuade its northern neighbor from possible military action.

The Turkish parliament on Wednesday approved a motion authorizing military strikes against the Kurdistan Workers' Party (PKK), which is accused of using bases in northern Iraq for attacks on targets across the border in Turkey.

Tetsu Emori, a fund manager at Astmax in Tokyo, said that a portion of Iraqi crude from its northern oilfields is exported from Turkey because it is easier to do so.

"This is why traders are looking closely at the situation along the border," Emori said. "There are some Iraqi exports waiting to be transported but that could not [be] because of the tension. That's the main factor."
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