Crude oil futures rose almost 3 percent as speculators bought contracts before the weekend to guard against possible US military retaliation for last month's terrorist attacks on New York and Washington.
A military strike might stir unrest in the Middle East, which supplies a third of the world's oil, analysts said. OPEC's index of oil prices has fallen 25 percent since the Sept. 11 attacks, which disrupted an already slowing US economy.
"No one wants to go into the weekend short when there is a rising likelihood of a strike," said Kyle Cooper, an energy analyst at Salomon Smith Barney Inc in Houston. Prices will fall tomorrow if there hasn't been any military action by then, he said.
Crude oil for November delivery rose as much as US$0.59, or 2.6 percent, to US$23.22 a barrel on the New York Mercantile Exchange.
Prices are down 17 percent since the Sept. 11 attacks and have dropped 1.8 percent this week.
In London, Brent crude oil for November settlement rose as much as US$0.67, or 3 percent, to US$22.82 a barrel on the International Petroleum Exchange.
Speculation that a US strike is nearing comes as UK Prime Minister Tony Blair visits Pakistan to bolster the alliance against Afghanistan's ruling Taliban. Pakistan is the only country to recognize the Afghan regime.
The Pakistani government yesterday said evidence against the prime suspect in the attacks, Saudi exile Osama bin Laden, was strong enough to indict him.
Afghanistan has harbored Bin laden for several years.
While the threat of a war increased prices today and yesterday, OPEC's benchmark index has stayed below the group's US$22 to US$28-a-barrel target range for nine consecutive days. The OPEC basket of crude oil varieties was worth US$19.91 a barrel yesterday, close to a two-year low. Friday's price will be posted tomorrow.
Under an informal agreement, OPEC, which pumps 40 percent of the world's oil, can cut supplies by 500,000 barrels a day if the index remains below US$22 for 10 consecutive days.
Oil ministers from OPEC will meet in Madrid on Sunday to discuss prices, Russian Energy Minister Igor Yusufov said in a statement.
The meeting was called by OPEC Secretary-General Ali Rodriguez, Yusufov said.
OPEC issued a press yesterday saying the organization would not ``hold an extraordinary ministerial meeting this weekend,'' though ministers were keeping in close telephone contact.
The OPEC 10 members with quotas -- all except Iraq -- exceeded their combined daily target of 23.201 million barrels by 1.28 million barrels, or 5.5 percent, in September, according to a Bloomberg survey.
"With OPEC already 1.3 million barrels above quota, they don't have much credibility," Cooper said.
OPEC oil production in September fell for the first time in three months, a Bloomberg survey showed.
Daily production from all 11 members of OPEC fell 480,000 barrels, or 1.7 percent, to 27.21 million barrels a day, according to the survey of producers, oil companies and analysts.
OPEC's third quota reduction of the year -- a drop of 1 million barrels a day -- took effect on Sept. 1. The group left quotas unchanged at a meeting in Vienna last week.
"If they announced a cut of 500,000 barrels, they wouldn't get the desired reaction," Cooper said.
"They have to first cut what they have already agreed to. Cohesion within the group may also be threatened if they continue to overproduce at this rate."
Expectations of reduced demand as the world economy slows led Goldman Sachs Group Inc on Friday to lower its forecast of next year's Brent crude oil price by a fifth, to US$16 a barrel, saying that OPEC can't support prices without losing too much market share.
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