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Oil prices escalate to record high after Saudi attack
New York City, June 02: Oil hits record highs of $42 a barrel in New York following Saudi attack.
New York City, June 02: Oil hits record highs of $42 a barrel in New York following Saudi attack.
U.S. oil prices leapt to a record $42 a barrel on Tuesday after an attack in Saudi Arabia by Islamic militants killed 22 people, heightening fears about political instability in the world`s biggest oil exporter.
U.S. light crude rose $2.12, more than five percent, to touch $42 a barrel following an attack by suspected al Qaeda militants on the offices of Western companies in the Saudi oil city of Khobar on Saturday.
That was the highest seen in 21 years of crude trading on the New York Mercantile Exchange. Prices later relaxed to $41.74. London Brent crude rose $2.01 to $38.59 a barrel.
Independent oil trader at the New York Mercantile Exchange, Eric Bolling said, "When we opened for trading in New York the market began to rally, I think a lot of traders were very very nervous of being short, understanding that any given terrorist attack inside Saudi Arabia could have substantial impact here in the U.S."
Traders fear the attack could be the start of a concerted al Qaeda offensive to disrupt Saudi supplies at a time when oil prices are already high enough to threaten world economic growth.
A statement purporting to come from al Qaeda claiming responsibility said it had hit "American companies ... that are specialised in oil and steal the wealth of Muslims."
Saudi Arabia`s leaders rushed to assure they were in full control after the Khobar attack, the second major strike in a month on the Saudi oil industry. But Britain warned more strikes were probable in the kingdom, which holds about one quarter of global petroleum reserves.
Khobar has no production, export or refining facilities but Western oil firms have offices and housing in the city 400 km (240 miles) northeast of Riyadh.
Kuwait`s oil minister said on Tuesday his country was stepping up oil installation security and was co-ordinating with fellow Gulf producers to protect against attacks.
Bolling said with the continuing al-Qaeda threat and demand in the U.S, oil prices are not set to drop any time soon.
"The problem is two-fold, number one this terrorism premium is very very strong and it has no signs of going away anytime soon and the second problem is domestically there is supply problems with gasoline and potential supply problems with natural gas, so all these factors in play I would think that any sort of dip in the price of oil may be an opportunity, for traders at least here in New York, to be buyers. I look for prices to range anywhere between 36 and 44 dollars a barrel going forward," said Bolling.
Ministers from the Organisation of the Petroleum Exporting Countries meet on Thursday in Beirut where they are expected to agree a rise in crude supply limits of up to 2.5 million barrels per day (bpd), or 11 percent.
A senior cartel delegate said on Tuesday such a rise in the quota could bring with it about one million barrels per day of extra real crude, mostly from Saudi Arabia.
OPEC is already pumping more than two million bpd above its existing formal ceiling of 23.5 million bpd.
The only producer with significant spare capacity, Saudi has already vowed to lift output this month about 10 percent to nine million barrels daily, irrespective of cartel quotas.
Kuwait said on Monday it had ramped up production by 150,000 bpd to 2.35 million bpd.
Many traders say the market has not reacted to the promise of more oil because it is waiting for hard evidence of stock builds in consumer nations.
Meanwhile in Washington, US Secretary of State Colin Powell told reporters that he believed Saudi oil was safe: " I have confidence in the ability of the Saudi Arabians to continue to provide a secure flow of oil products from Saudi Arabia," Powell said.
Bureau Report
Independent oil trader at the New York Mercantile Exchange, Eric Bolling said, "When we opened for trading in New York the market began to rally, I think a lot of traders were very very nervous of being short, understanding that any given terrorist attack inside Saudi Arabia could have substantial impact here in the U.S."
Traders fear the attack could be the start of a concerted al Qaeda offensive to disrupt Saudi supplies at a time when oil prices are already high enough to threaten world economic growth.
A statement purporting to come from al Qaeda claiming responsibility said it had hit "American companies ... that are specialised in oil and steal the wealth of Muslims."
Saudi Arabia`s leaders rushed to assure they were in full control after the Khobar attack, the second major strike in a month on the Saudi oil industry. But Britain warned more strikes were probable in the kingdom, which holds about one quarter of global petroleum reserves.
Khobar has no production, export or refining facilities but Western oil firms have offices and housing in the city 400 km (240 miles) northeast of Riyadh.
Kuwait`s oil minister said on Tuesday his country was stepping up oil installation security and was co-ordinating with fellow Gulf producers to protect against attacks.
Bolling said with the continuing al-Qaeda threat and demand in the U.S, oil prices are not set to drop any time soon.
"The problem is two-fold, number one this terrorism premium is very very strong and it has no signs of going away anytime soon and the second problem is domestically there is supply problems with gasoline and potential supply problems with natural gas, so all these factors in play I would think that any sort of dip in the price of oil may be an opportunity, for traders at least here in New York, to be buyers. I look for prices to range anywhere between 36 and 44 dollars a barrel going forward," said Bolling.
Ministers from the Organisation of the Petroleum Exporting Countries meet on Thursday in Beirut where they are expected to agree a rise in crude supply limits of up to 2.5 million barrels per day (bpd), or 11 percent.
A senior cartel delegate said on Tuesday such a rise in the quota could bring with it about one million barrels per day of extra real crude, mostly from Saudi Arabia.
OPEC is already pumping more than two million bpd above its existing formal ceiling of 23.5 million bpd.
The only producer with significant spare capacity, Saudi has already vowed to lift output this month about 10 percent to nine million barrels daily, irrespective of cartel quotas.
Kuwait said on Monday it had ramped up production by 150,000 bpd to 2.35 million bpd.
Many traders say the market has not reacted to the promise of more oil because it is waiting for hard evidence of stock builds in consumer nations.
Meanwhile in Washington, US Secretary of State Colin Powell told reporters that he believed Saudi oil was safe: " I have confidence in the ability of the Saudi Arabians to continue to provide a secure flow of oil products from Saudi Arabia," Powell said.
Bureau Report