Crude oil surges to fresh all-time high of US$92 a barrel

Crude oil surges to fresh all-time high of US$92 a barrel

By: Fat Prophets

Crude oil last night rose above US$90 a barrel to a record in New York, the day after a government report showed an unexpected drop in US stockpiles. Supplies fell by 5.29 million barrels to 316.6 million, according to yesterday's Energy Department report.

New US sanctions against Iran, warnings of a Turkish assault on Kurdish militants in Iraq and a falling US dollar also pushed prices higher today.

Crude oil for December delivery rose US$3.36, or 3.9%, to settle at a record US$90.46 a barrel at 2:45 p.m. on the New York Mercantile Exchange. It was the biggest one-day gain since April 23. Futures climbed to US$90.60, the highest intraday price since trading began in 1983. The previous record, US$90.07, was touched on Oct. 19.

Brent crude oil for December settlement rose US$3.11, or 3.7%, to close at a record US$87.48 a barrel on the London-based ICE Futures Europe exchange. Brent reached US$87.59, the highest since trading began in 1988.

Bloomberg reports that the Bush administration has announced new sanctions against Iran that designate the Iranian Revolutionary Guard Corps as a proliferator of weapons of mass destruction and its Quds force as a supporter of terrorism.

Secretary of State Condoleezza Rice, who joined Treasury Secretary Henry Paulson in announcing the measures, said today's steps were designed "to increase the costs to Iran of its irresponsible behaviour."

The US is trying to get Iran to halt uranium enrichment that it suspects is aimed at developing nuclear weapons. Iran, which holds the world's second-largest oil and natural gas reserves, says it wants to enrich uranium to produce electricity.

The dispute has bolstered oil prices since January 2006 because of concern that oil shipments from the country might be cut.

Meanwhile, Turkey won't stand by after Iraq allowed members of the Kurdistan Workers' Party, or PKK, to use bases on Iraqi territory for attacks that left 42 Turks dead this month, President Abdullah Gul said in Ankara. Shelling by Turkish artillery of the Iraqi side of the border continued today, CNN Turk reported.

Iraq's oil-rich northern region is controlled by a semi-autonomous Kurdish administration. Kirkuk, the center of the region, is about 160km from the Turkish border.

The US dollar approached a record low against the euro after reports showed US orders for durable goods unexpectedly dropped and initial jobless claims were higher than forecast, signalling economic growth may weaken. Slower growth supports the argument for the Federal Reserve to cut interest rates next week.

Oil jumped after the US central bank cut its benchmark rate by a half-percentage point to 4.75% on Sept. 18 to bolster the economy. The Fed next meets on Oct. 30-31 and investors anticipate policy makers will lower the main rate a quarter point to 4.5%.

Members of OPEC have said a falling dollar justifies higher prices because oil-producing countries sell oil in dollars and often buy goods in euros. The group agreed in September to produce an extra 500,000 barrels a day starting Nov. 1 to lower prices and meet fourth-quarter demand.

Prices for gasoline and heating oil also rose because yesterday's report showed that petroleum-product stockpiles fell last week.

Heating oil for November delivery increased 6.64 cents, or 2.8%, to close at a record us$2.4084 a gallon in New York. Futures touched US$2.4109, the highest since trading began in 1978.

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