Market watch, Oct. 13

Violence in the Middle East on Thursday caused international energy prices to hit new highs for the decade, amid fears that the deepening crisis could lead to serious fuel shortages with US inventories at historically low levels.


Violence in the Middle East on Thursday caused international energy prices to hit new highs for the decade, amid fears that the deepening crisis could lead to serious fuel shortages with US inventories at historically low levels.

The November contract for benchmark US light, sweet crudes shot up by $2.81 to $36.06/bbl on the New York Mercantile Exchange, while the December contract jumped $2.48 to $35.72/bbl. In after-hours electronic trading, both contracts declined slightly to $36.03/bbl and $35.68/bbl, respectively.

The November contract for unleaded gasoline soared 7.42� to 99.82�/gal, while home heating oil for the same month escalated by 5.95� to $1.0773/gal on the NYMEX.

The natural gas position for November rose by 12.2� to $5.63/Mcf.

On the International Petroleum Exchange in London, the November contract for North Sea Brent crude closed at $34.59/bbl, up by $2.80 for the day, after hitting a 10-year record of $35.30/bbl at one point. The December contract rose by $2.30 to $34.47/bbl.

The November natural gas contract also increased by 6� to the equivalent of $4.04/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes was up $2.03 to $32.57/bbl.

Trade in energy futures Thursday was dominated by fears that the spread of violence might threaten oil supplies from the Middle East.

An apparently suicidal terrorist attack killed at least six US sailors and wounded more than 30 others aboard the destroyer USS Cole as it was docking at a floating fueling facility in Aden, Yemen. Another 11 US military personnel were reported missing in the wake of that attack.

Later in London, an individual who claimed to be speaking for the fundamentalist Islamic Army of Aden said that the relatively new and little-known organization carried out that attack.

Meanwhile, Israeli helicopter gunships attacked targets near Yasser Arafat's offices in two Palestinian towns after three Israeli soldiers were beaten and stabbed to death by a Palestinian mob.

US officials called on Palestinian and Israeli leaders to halt the violence.

Former Israeli and Syrian ambassador Edward P. Djerejian, now director of the Baker Institute for Public Policy at Rice University in Houston, said Thursday that much will depend on Saudi Arabia, the swing oil producer in the region, and its leaders' close ties to Arafat (OGJ Online, Oct. 12, 2000).

But with thousands of Arabs taking to the streets in Middle East countries from Morocco to Oman, Arab leaders have less ability to calm things down. "It becomes more difficult for Saudi Arabia to play this role when the streets are so impassioned," Djerejian said in an interview with OGJ Online.

If the crisis continues, Djerejian said, "I think we can see very high energy prices this winter. The market has already demonstrated the jitters."

Husqvarna, a Swedish manufacturer of forest, lawn and garden products, said Thursday that rising fuel costs sparked a 30% increase in North American sales of chain saws during September over the same period a year ago. Company officials said people are buying chain saws to cut wood for wood-burning stoves, whose sales are also on the rise.

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