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Wednesday, 07 January, 2009, 21:10 GMT | more >>

Oil busts $85 barrier on Turkey tension



By Upstream staff 

Oil hit a new record high above $85 a barrel today, continuing its upward march as tension between Turkey and Iraq added to a rally fuelled by winter supply worries and dollar weakness.

US crude was $1.75 higher at $85.44 a barrel by 1730 GMT, off a new record high of $85.55 - its fifth straight session of gains. London Brent crude was $1.64 higher at $82.19.

"A run at $90 is now seen as reasonable," Citigroup analysts said in a note.

Prices jumped on Friday after the Kurdistan Workers Party said it would move back into Turkey from northern Iraq and target the Turkish government.

Turkish artillery fired seven to eight shells into a village in northern Iraq late on Saturday, witnesses said.

Turkey routinely shells the mountainous border region, but the latest shelling came as the government is expected to seek approval from parliament this week for a major operation against the Kurdistan rebels based in the mountains of northern Iraq.

Yesterday US Secretary of State Condoleezza Rice urged restraint.

"This is one of the reasons why people are so bullish, but I don't think it's a main issue," Tetsu Emori, a fund manager at Japan's Astmax Futures, told Reuters.

Analysts also cited the increase in speculative buying in oil. Regulatory data released on Friday showed that speculators on the New York Mercantile Exchange crude oil market increased their net long positions in the week to 9 October.

"A run at $90 is now seen as reasonable," Citigroup said in a note.

Oil has remained above $80 for most of the past month after soaring from below $70 in mid-August, fuelled by a mixture of supply concerns ahead of winter and record lows for the dollar, which has driven speculators to buy oil as a hedge.

The dollar has since recovered some ground versus the euro and yen, but some analysts say the currency outlook remains the biggest prop for prices, despite the revival of a geopolitical risk premium in a region that pumps a third of the world's oil.

Monday, 15 October, 2007, 10:05 GMT  | last updated: Monday, 15 October, 2007, 17:50 GMT

Conflict: PKK gunmen at a training camp in norther Iraq
 
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