MARKET WATCH: Crude futures price pushes past $86/bbl

The front-month crude futures contract continued climbing to new heights Oct. 15, pushing past $86/bbl in New York, although most analysts see too few potential changes in market fundamentals to support a continued rally.

Sam Fletcher
Senior Writer

HOUSTON, Oct. 16 -- The front-month crude futures contract continued climbing to new heights Oct. 15, pushing past $86/bbl in New York, although most analysts see too few potential changes in market fundamentals to support a continued rally.

Turkey's parliament is scheduled Oct. 17 to consider a plan for military action against Kurdish militants in Iraq. Although the US is pressuring Turkey to show constraint, some Turkish officials claim a conflict with Kurdish militants is unavoidable, said analysts in the Houston office of Raymond James & Associates Inc.

Conflict between the Turkish military and the Kurdistan Workers' Party in Iraq could disrupt not only pipeline transportation of oil from Iraq's Kirkuk field in the north to the Turkish export terminal of Ceyhan but also the delivery of oil from the Caspian Sea to the Mediterranean via the 1,768-km Baku-Ceyhan-Tbilisi pipeline that Azerbaijan, Georgia, and Turkey officially inaugurated in 2006, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. The Kirkuk-Ceyhan pipeline has been the subject of persistent sabotage since the US-led invasion of Iraq.

Moreover, the recent spike in crude futures prices also has been supported by the weakening of the dollar versus the euro, and the Organization of Petroleum Exporting Countries' reduction of its forecast of non-OPEC supply for the year. In a recent report, OPEC said non-OPEC supply will average 50.3 million b/d in 2007, down 28,000 b/d from last month's estimate.

Still, said Jakob, "World supply and demand is not tight enough to justify a price of crude oil above $90/bbl."

Energy prices
The November contract for sweet, light crudes hit an all-time high of $86.71/bbl Oct. 15 on the New York Mercantile Exchange before closing at a record $86.13/bbl, up $2.44 for the day. The December contract surged by $2.39 to $85.13/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $2.44 to $86.14/bbl. Heating oil for November delivery escalated by 6.08¢ to $2.31/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) popped up 7.24¢ to $2.16/gal.

The November natural gas contract shot up 47.1¢ to $7.45/MMbtu on NYMEX, pulled along by the surge in oil prices. On the US spot market, gas at Henry Hub, La., jumped 41.5¢ to $7.04/MMbtu.

In London, the November IPE contract for North Sea Brent crude gained $2.20 to $82.75/bbl. The November contract for gas oil climbed $11.25 to $709.50/tonne.

The average price for OPEC's basket of 12 reference crudes increased $1.14 to $78.76/bbl on Oct. 15.

Contact Sam Fletcher at samf@ogjonline.com.

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