World oil prices rose in Asian trading yesterday on fears of possible supply disruption following the weekend's terrorist attacks in oil kingpin Saudi Arabia, dealers said.
By late afternoon, the benchmark New York light sweet crude for July was at US$40.62 a barrel, up from US$39.88 at the close in New York on Friday. The US markets were closed on Monday for a public holiday.
Dealers said the price rise was driven purely by jittery investors worried that petroleum-related facilities in Saudi Arabia, the world's biggest oil producer and exporter, would continue to be the target of terrorist attacks.
"The market is worried about such incidents even though it does not relate directly to the oil structure," said Abdallah Kharma, acting head of international oil trading at China Aviation Corp. "It's psychological more than anything else."
Twenty-two people, including 19 foreigners, were killed in the weekend attack and hostage taking at oil company offices and a housing complex in the eastern Saudi city of Khobar.
The Khobar attack was the second in a month on a hub of the oil industry in Saudi Arabia, and Australia and Britain have led international warnings of worse to come in the kingdom.
Oil analysts, including economic research house IDEAglobal, believe terrorist concerns are adding between US$7 and US$10 to crude prices, which are 30 percent higher than last year's average of US$28.90.
Yesterday's price rise came despite Saudi Arabia issuing assurances afer the Khobar attack that supplies would not be affected and that it would be able to fulfill its pledge to increase output.
Saudi Arabia is producing some 9 million barrels per day (bpd) and is believed to be able to produce 10.5 to 11 million bpd, making it the country with the biggest spare production capacity.
The 11-member OPEC, which includes Saudi Arabia, has also assured ahead of its meeting tomorrow in Lebanon it will produce enough to meet market demands.
Qatari Energy Minister Abdullah Bin Hamad Al-Attiya said on Monday he expected the cartel to lift its official production ceiling by at least 2.5 million bpd from 23.5 million bpd."Of course, there is a near consensus on raising production," he said.
Analysts said that although the OPEC meeting would be watched very closely, crude prices were likely to remain high for a variety of reasons aside from the global security concerns.
A resurgent global economy led by the US, China and increasingly India have also driven crude prices higher over the past twelve months, with an increase in OPEC output expected to have little impact, analysts said.
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