Turkey fears send oil to record high
By Javier Blas in London and Daniel Dombey in Washington
Published: October 12 2007 19:19 | Last updated: October 13 2007 00:43
Crude oil prices on Friday surged to a fresh high of $84 a barrel on
concerns that Turkey might soon launch an invasion of northern Iraq in
an attempt to hit Kurdish militants it accuses of attacking Turkish
targets.
Such an attack could destabilise the Kurdistan region, the only
relatively peaceful area in Iraq. But public outrage against the
separatist Kurdish PKK is running high after recent attacks and
Turkey’s parliament is set to vote next week on a government request
for authorisation of a military operation.
Rapidly declining oil inventories in developed countries ahead of the
northern hemisphere winter also helped push the price higher. Nymex
December West Texas Intermediate surged 97 cents to $84.05 a barrel,
above the previous record of $83.90 a barrel, as traders covered their
positions for the weekend. It closed at $83.71 a barrel, up 63 cents
on the day.
Turkey said it was ready for any international criticism if it
launched an attack against Kurdish rebels who it says use northern
Iraq as a base to attack Turkish – targets. "We do not need anyone’s
advice on northern Iraq and the operation to be carried out there,"
Recep Tayyip Erdogan, prime minister, said.
The US has sought to dissuade Turkey from such an operation but
relations between Washington and Ankara have become more tense after a
US congressional committee voted last week to denounce as genocide the
mass killings of Armenians under the Ottoman Empire.
Iraq pumped about 2.18m barrels a day of crude oil in September, up
190,000 b/d from August, according to the latest data from the
International Energy Agency (IEA), the western countries’ energy
watchdog.
But most of the production was in the south of the country, rather
than the north, analysts said. Crude oil traders forecast oil exports
>From northern Iraq would be about 230,000 b/d in September and early
October.
Turkey is a key route for a crude oil pipeline from the Caspian sea
that is forecast to carry about 500,000 b/d of oil by the end of 2007.
The price surge came amid warnings from the IEA that supplies would
get "tighter this winter" as developed countries’ inventories fell at
the end of August to below the five-year average, to 53.5 days of
forward consumption. Inventories were at 55 days on demand in the
second quarter.
"Those stocks are clearly tighter than they have been for some time
but what is driving market expectations and, therefore, prices is the
lack of confidence that they will be replenished," the IEA said.
The watchdog has asked the Organisation of the Petroleum Exporting
Countries (Opec) to boost its supplies to build up inventories. Crude
oil and products inventories usually increase in the third quarter,
ahead of the winter, but so far they have fallen by 360,000 barrels a
day.
The IEA kept roughly unchanged its forecast for oil demand in spite of
record high prices and slowing economic growth in the US and other
developed countries.
It said demand would average 85.9m b/d this year and 88m b/d in 2008,
roughly the same as it predicted a month ago.
Copyright The Financial Times Limited 2007
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