MARKET WATCHTerrorism pushes crude futures price to record high on NYMEX

Sam Fletcher
Senior Writer
HOUSTON, June 2 -- Crude futures prices leaped to a new 21-year high Tuesday on the New York market, wiping out the previous week's losses, as traders returning from the long Memorial Day weekend reacted to terrorist attacks Sunday on oil firms and westerners in Saudi Arabia.

Fear of possible disruption of Middle Eastern oil supplies trhough additional terrorist attacks overrode continued signals that members of the Organization of Petroleum Exporting Countries are prepared to increase their production quota at a special meeting Thursday in Beirut. A push by Saudi Oil Minister Ali Al-Naimi to have OPEC hike its quota by 2.5 million b/d to 26 million b/d triggered a rollback in crude futures prices through most of last week. In their rush to buy crude futures contracts, traders ignored reassurances by Saudi officials that they were stepping up security to avoid another such attack.

"Well-funded energy funds went on a buying spree as if there was no tomorrow," one source reported. "The turmoil in the energy market influenced every aspect of the financial markets." The US dollar, the currency in which crude oil is priced on world markets, weakened against most of its traded counterparts except the yen.

Record high oil price
The July contract for benchmark US light, sweet crudes jumped by $2.45 to $42.33/bbl Tuesday, a record closing price for the near-month crude contract on the New York Mercantile Exchange. The August contract shot up by $2.48 to $42.19/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., soared by $2.45 to $42.35/bbl.

Gasoline for July delivery escalated by 6.55¢ to $1.353/gal on NYMEX, while heating oil for the same month gained 6.12¢ to $1.0641/gal. The July natural gas contract jumped by 23.9¢ to $6.68/Mcf Tuesday on NYMEX, carried along by the sharp rally in the crude futures market despite a flat US spot market for natural gas and forecasts of moderate weather for this week, said analysts Wednesday at Enerfax Daily.

In London, the July contract for North Sea Brent crude shot up by $2.50 to $39.08/bbl Tuesday on the International Petroleum Exchange—one of the largest single-day increases ever recorded in that market. Brokers reported that market was in "a bullish frenzy" and speculated that Brent crude futures would soon hit $40/bbl and could rally through $41/bbl, the 1990 Gulf War high, regardless of whether or not OPEC increases its production quota.

Meanwhile, gas oil for June delivery gained $21.75 to $336.25/tonne. However, the July natural gas contract fell by 10.7¢ to the equivalent of $3.89/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes jumped by $1.47 to $37.64/bbl Tuesday.

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