Crude oil rose, nearing US$30 a barrel, on concern US retaliation to this week's terrorist attacks in New York and Washington will disrupt oil supplies from the Middle East.
President George W. Bush promised to find and punish those responsible, and US officials suspect Saudi-born Osama bin Laden, who is exiled in Afghanistan. While OPEC has said it would continue oil sales, traders are concerned a US response targeting the Middle East may spark unrest and disrupt shipments from a region that pumps a third of the world's oil.
"A tremendous amount of our oil supply comes from the Middle East, which has long been a very unstable political area," said Robert Rose, chairman, president and chief executive of Global Marine Inc, Houston-based oil driller. "And there are a lot of scenarios that could put supply in jeopardy."
Crude oil for October delivery traded at US$29.60 a barrel at the end of an electronic trading session on the New York Mercantile Exchange. Prices were up US$1.83, or 6.6 percent, from Tuesday, when trading was halted by the attacks. The Nymex had been closed because of its proximity to the World Trade Center.
Earlier today, Brent crude oil for November settlement rose US$1.06, or 3.7 percent, to US$29.43 a barrel on the International Petroleum Exchange in London. Prices there have gained more than 7 percent since the World Trade Center and Pentagon were attacked.
Oil prices often rise in response to tensions in the Middle East. In January 1979, US ally Shah Mohammad Reza Pahlavi of Iran was overthrown by the fundamentalist Islamic revolution, causing oil prices to more than double to more than US$30 a barrel.
Brent crude surged 13 percent to US$35.30 a barrel in two weeks following the outbreak of a round of violence between Israelis and Palestinians last September. It rose above US$40 a barrel two months after Iraq invaded Kuwait in 1990.
Bush's pledge to eradicate terrorism threatens to extend beyond Afghanistan. Iran, Iraq, Libya, Syria and Sudan are all listed by the State Department as sponsors of terrorism.
In preparation for its retaliation, the US called up 50,000 reserve soldiers, and the Senate approved a law giving Bush the right to use military force, what Senator Joseph Biden, a Delaware Democrat, called tantamount to a declaration of war.
Still, some analysts argue that with air travel restricted and an increasing likelihood of recession, lower energy demand will hurt prices.
"Once we begin trading freely, we should see prices fall," said Michael Fitzpatrick, a broker at Fimat USA Inc in New York. "The situation does not support these prices, regardless of the terrorist attacks. There is an uncertainty premium at the moment."
OPEC member-states are themselves facing a threat from Islamic fundamentalists, with Saudi Arabia and Bahrain among many in the Middle East to experience domestic protests. In Egypt, a US ally, the Muslim Brotherhood has killed tourists and assassinated the last president, Anwar Sadat, in 1981.
Perceived danger to shipping in the region has pushed charges for tankers carrying crude oil from the Persian Gulf to the US up 20 percent since Tuesday. Shipments in a 250,000-ton tanker now cost US$12.44, or US$1.67 a barrel. Prices for tankers from Africa haven't changed.
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