Oil Price Strikes New High
By Reuters
02 June, 2004SINGAPORE - U.S. oil prices struck a new record high in early Wednesday trade on concerns that a campaign of violence by Islamic militants in Saudi Arabia could destabilize the world's biggest crude exporter.
U.S. light crude (CLc1: Quote, Profile, Research) in electronic trade hit $42.45 a barrel, the highest since futures were launched in New York in 1983. Prices then drifted and at 2:20 a.m. EDT crude traded off 29 cents at $42.04 a barrel. London Brent crude (LCOc1: Quote, Profile, Research) slipped 38 cents to $38.70.
Oil surged $2.45, six percent on Tuesday, after an attack in the Saudi oil city of Khobar heightened concerns over the ability of the ruling Saudi royal family to contain a wave of violence by Islamic militants.
The latest rally has raised doubts about whether an expected increase in supplies from a Thursday OPEC meeting in Beirut will be enough to tame prices.
Traders fear the Khobar attack could mark the start of a concerted al Qaeda offensive to disrupt Saudi supplies at a time when oil prices are already high enough to threaten world economic growth.
"The disruption fear won't go away soon. Only Saudi Arabia has surplus capacity, and if it's oil flow should be disrupted, it could bring a hopeless situation," said Tony Nunan, manager at Mitsubishi Corp's oil unit in Tokyo.
"The market fears an imminent hit on oil infrastructure," David Thurtell at Commonwealth Bank of Australia, said in a note.
Kuwait said it was stepping up security at its oil installations and was coordinating with fellow Gulf producers -- Saudi Arabia, the United Arab Emirates and Qatar -- to protect against attacks.
Riyadh has vowed to keep supplies running smoothly from its heavily guarded oil facilities. It has already raised output to 9.1 million barrels a day (bpd) in an effort to dampen prices, and it has called on OPEC to lift supply limits by 2-2.5 million bpd.
Ministers from the Organization of the Petroleum Exporting Countries meet in Beirut on Thursday to discuss the Saudi proposal.
The United Arab Emirates, the only OPEC member along with Saudi Arabia with any significant spare capacity, said on Wednesday it would lift output in June by 400,000 bpd.
"The UAE will produce an extra 400,000 bpd above its quota in June," Oil Minister Obaid al-Nasseri said.
OPEC is already pumping more than two million bpd above its existing official ceiling of 23.5 million bpd, and some ministers said there may be little more they can do to quell the surge in prices.
"The fear factor, we cannot control it, we wish we could, but we will do something," Qatari Oil Minister Abdullah al-Attiyah told Reuters.
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