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Bloomberg: Crude Rises to $92 Record After U.S. Says Iran Backs Terrorism

By Alexander Kwiatkowski and Angela Macdonald-Smith

 Oct. 26 (Bloomberg) — Crude oil rose above $92 a barrel for the first time in New York after the U.S. accused the Iranian military of supporting terrorism and stepped up pressure on foreign companies to cut ties with the Middle East oil producer.

Oil was also pushed higher as Turkey warned of a wider military assault into northern Iraq and called on the U.S. to join the fight. Turkey’s army shelled suspected militant camps on the Iraqi side of the border.

“The U.S. sanctions against Iran seem to be pushing things to some sort of confrontation,” said Gavin Wendt, senior resources analyst at Fat Prophets in Sydney. “When you’re talking Iran and Iraq, two of the biggest holders of oil reserves, no wonder markets are nervous.”

Record prices swelled profits at oil companies including Royal Dutch Shell Plc and Petro-Canada last quarter, while increasing costs for consumers.

Crude oil for December delivery rose as much as $1.76, or 2 percent, to $92.22 a barrel in electronic trading on the New York Mercantile Exchange, the highest since oil futures began trading in 1983. It traded at $91.90 at 9:49 a.m. London time. Prices are 52 percent higher than a year ago.

Yesterday the contract jumped $3.36, or 3.9 percent, the biggest one-day gain since April 23.

Nervous Situation

“The Iranian situation is one to be very, very nervous on,” said Rob Laughlin, a senior broker with MF Global Ltd. “OPEC could try to cool things down,” by increasing oil supply, he said.

Record oil prices are raising concerns that inflation will rise and suppress growth in the global economy. The Group of Seven industrial nations said in a statement last week that high crude levels will moderate growth going forward.

“Growth in OECD countries will be dented by these kinds of levels already,” said Eugen Weinberg, a commodities analyst at Commerzbank AG in Frankfurt. “We’ll probably see some slowdown and some negative effects from the oil price.”

Brent crude oil for December settlement rose as much as $1.82 to a record $89.30 a barrel on the London-based ICE Futures Europe exchange. It was at $88.86 at 9:49 a.m. local time.

The Bush administration yesterday 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 sanctions, said the steps were designed “to increase the costs to Iran of its irresponsible behavior.”

The U.S. 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.

“Anything that happens in Iran is important to the market because of its position as a key exporter,” said Michael Davies, an analyst at Sucden (U.K.) Ltd. in London. “The sanctions are going to be yet another thing to encourage the bulls.”

Turkey said it may step up military action in northern Iraq and called on the U.S. to join the fight as the army shelled suspected militant camps over the Iraqi border.

Turkey Warns

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 yesterday in Ankara. Shelling by Turkish artillery of the Iraqi side of the border continued yesterday, CNN Turk reported.

The dollar approached a record low against the euro after reports showed U.S. orders for durable goods fell unexpectedly and initial jobless claims were higher than forecast, signaling economic growth may weaken. China yesterday said its economy, the biggest contributor to global growth, expanded 11.5 percent in the third quarter from a year earlier.

“The currency is really holding up commodities market generally,” said Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Dovetailing that with strong Chinese growth yesterday, it’s enough to give oil that extra momentum.”

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, has said it would boost production by about 500,000 barrels a day, starting Nov. 1. The group doesn’t plan additional output increases, even with record oil prices, Venezuelan Energy Minister Rafael Ramirez told reporters in Caracas yesterday.

“There is enough oil in the market,” Ramirez said.

OPEC’s refusal to consider a further increase is surprising, said Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne.

“I wouldn’t have thought that the majority of producers would be happy with prices above $90,” Burg said. “I would have thought that the force of Saudi Arabia and its more dovish supporters might have brought a bit more oil on.”

To contact the reporter on this story: Alexander Kwiatkowski in London at [email protected] Angela Macdonald-Smith in Sydney at [email protected] ;

Last Updated: October 26, 2007 04:49 EDT and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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