The Turkish government's decision Monday to ask Parliament for permission to pursue Kurdish rebels into Iraq stoked concern about potential interruptions to oil supplies."Whenever there is any escalation in political tensions in the Middle East, oil markets become concerned," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney. "There is production and there are pipelines that people worry may be affected if there are any issues in Iraq."
There have been several skirmishes along the Turkey-Iraq border already. Although oil coming out of the region has been erratic, a total disruption would send prices higher, analysts said.
Light, sweet crude for November delivery rose $1.56 to $87.69 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe after rising as high as $87.97. The contract had jumped $2.44 to settle at a record close of $86.13 a barrel Monday.
Brent crude advanced $1.21 to $83.96 a barrel on the ICE Futures exchange in London.
"$86 is a historically high level. ... Many people are looking at this level for the first time so it's very difficult to say what will happen next," said Tetsu Emori, commodity markets fund manager at ASTMAX Futures Co. in Tokyo. "All the factors in the market are bullish, there are no bearish factors except maybe that the market looks like it's been overbought, technically."
Despite the gains, Nymex oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
Technical buying by investment funds is also driving oil's record run, analysts say. Data released Friday showed that speculative buying of oil contracts increased last week.
"Particularly because the oil price has been so strong, that in itself may have attracted some speculators to oil," Moore said.
Many investment funds automatically buy or sell oil futures when prices hit certain levels. In recent days, as oil has pushed into record territory, several of these resistance prices levels have been broached. That triggers new buying, driving prices even higher.
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