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Oil Rises to Record Above $93 a Barrel       Send a link to a friend

[October 29, 2007]  VIENNA, Austria (AP) -- Oil prices spiked above $93 a barrel to a new trading high Monday before falling back, propelled by news that Mexico's state oil company was suspending about a fifth of its oil production due to a storm.

The news that Petroleos Mexicanos, or Pemex, was to shut as much as 600,000 barrels of daily crude production came amid political tensions in the Mideast, a weak U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices.

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The Pemex shut-in "is the one that has pushed prices above $93," said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz. "This is on top of what has already been simmering."

Pemex announced Sunday that it had already shut 200,000 barrels of daily production in the Gulf of Mexico because of bad weather and was planning to shut another 400,000. Pemex produces about 3.2 million barrels of crude oil a day, of which 2.7 million barrels a day comes from the Bay of Campeche in the southern Gulf.

In addition, Vienna's PVM Oil Associates noted that "more bad weather could hit the region in the form of Tropical Storm Noel."

Light, sweet crude for December delivery rose as much as $1.34 to $93.20 a barrel, a new intraday record, in early afternoon Asian electronic trading on the New York Mercantile Exchange. By noon in Europe, it had slipped back to $92.71 a barrel.

That was still up 85 cents from Friday's record close of $91.86 a barrel. The previous trading high was $92.22 a barrel, set Friday.

Oil futures have gained almost $8 a barrel, or 9 percent, since the U.S. Department of Energy reported last Wednesday a sharp drop in the country's crude stocks.

"The strong price is due to supply concerns in general, on top of which we have the geopolitical news," Shum said.

A rumbling of tensions in the Middle East and elsewhere last week already had traders worried about the disruption of oil exports.

A sharp escalation in fighting between Turkey and Kurdish rebels has brought Turkey to the brink of sending troops south across the border into Iraq, and the United States last week announced harsh penalties against Iran -- the world's fourth largest oil producer -- in hopes of raising pressure on the world financial system to cut ties with Tehran.

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Also, last Friday, gunmen in speedboats kidnapped six workers from an oil vessel off Nigeria's coast, the second attack on an oil field there in a week. Nigeria is Africa's largest oil exporter and the fifth-largest supplier of crude to the United States.

A weak U.S. dollar continues to be a factor in driving oil prices as well.

The U.S. dollar's descent against major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.

Analysts note the price of oil is closing in on the inflation-adjusted highs hit in early 1980. Depending on the adjustment, a then $38 barrel of oil would be worth $96 to $101 or more today.

In London, December Brent crude advanced 76 cents to $89.45 a barrel on the ICE futures exchange.

Heating oil and gasoline futures rose nearly 2 cents to $2.45 a gallon and $2.291 per gallon.

Natural gas futures gained 8 cents to $7.298 per 1,000 cubic feet.

[The Associated Press; By GEORGE JAHN]

Associated Press writer Gillian Wong in Singapore and AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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