Market watch: Concerns about Iraq push NYMEX oil price past $30/bbl

Oil futures prices jumped above $30/bbl Monday on the New York Mercantile Exchange as Iraq rejected any new United Nations resolution regarding weapons inspectors.

By OGJ editors

HOUSTON, Sept. 24 -- Oil futures prices jumped above $30/bbl Monday on the New York Mercantile Exchange as Iraq rejected any new United Nations resolution regarding weapons inspectors and fanned market fears of military action of Desert Storm proportions in the Middle East.

Three tropical storms also added to market jitters. Isidore was downgraded from a hurricane Monday after losing power over the Yucatan peninsula in Mexico, but that storm is expected soon to move out into the Gulf of Mexico where it could gather strength. Therefore, a hurricane watch remained in effect Tuesday along the US Gulf Coast from Cameron, La., to Pascagoula, Miss.

Meanwhile, Tropical Storm Lili was 500 miles southeast of Santo Domingo, Dominican Republic, early Tuesday. The National Weather Service in Miami said that storm could develop into a hurricane by Wednesday and might threaten the Gulf Coast by this weekend. At the same time, Tropical Storm Kyle was reported gaining strength over the open Atlantic Ocean 800 miles east-southeast of Bermuda. It, too, could become a hurricane by Wednesday, officials said.

In addition, traders were keeping a wary eye on potentially crippling strikes by oil workers in both Nigeria and Mexico.

The new front-month November contract for benchmark US light, sweet crudes escalated by 87¢ to $30.71/bbl on NYMEX, while the December contract increased 77¢ to $30.45/bbl. Unleaded gasoline for November delivery bumped up 2.86¢ to 84.27¢/gal. Heating oil for the same month was up 1.87¢to 80.57¢/gal.

The November natural gas contract soared by 22¢ to $3.98/Mcf "on fears of a Hurricane Isidore entering the central Gulf of Mexico," said analysts Tuesday at Enerfax Daily. "If Isidore threatens energy production in the Gulf of Mexico, natural gas prices will likely jump over $4.50/ MMbtu. As of yet, only a small amount of offshore natural gas production has been shut in, and no oil production is shut in, according to the Minerals Management Service."

In London, concerns about developments in Iraq pushed futures prices for North Sea Brent oil above $29/bbl and triggered technical buying on the International Petroleum Exchange. The November Brent contract closed at $29.13/bbl, up 70¢ for the day after trading in a range of $28.72-29.37/bbl. The October natural gas contract jumped by 4¢ to the equivalent of $2.67/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 68¢ to $28.28/bbl Monday, pushing through the top of the group's targeted price spread.

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