Oil prices jump on news of Iraquis'torching of wells

January 23, 1991|By New York times News Service

NEW YORK — Oil prices jumped yesterday after the first flames leaped from Kuwaiti oil fields. They rose more later when an Iraqi missile exploded in Israel.

On the New York Mercantile Exchange, crude for February delivery rose about $2 a barrel in the morning after reports that Iraq was blowing up oil wells and storage tanks in occupied Kuwait.

The contract climbed further in the afternoon on initial reports that an Iraqi Scud missile had injured many civilians in Tel Aviv, closing at $24.18 a barrel, up $2.88.

The gain yesterday follows a $2.05 increase Monday, and traders said the price was higher than current levels of supply and demand would dictate in peacetime.

"It seems that we're pounding the war premium back into the market," said Nauman Barakat, a senior energy trader at Merrill Lynch.

After the New York Merc closed, the price rose 50 cents to $1 more in cash transactions as traders continued to react to the attack on Israel, said Andrew B. Shasha, an energy trader in Houston.

Only a small fraction of the oil consumed in the United States each year is traded on the Merc.

But prices set there are the benchmark for the many private cash trades.

Oil prices were higher this morning in Tokyo, the Associated Press reported.

North Sea Brent crude for March delivery was traded at $21.65 a barrel at midday, up from its overnight close in London at $20.50.

Traders said that while the oil production of Kuwait and Iraq had been fully replaced by other countries, the destruction of Kuwaiti oil-industry equipment was another indication of Iraq's resolve to continue fighting.

And the attack on Israel again raised the possibility of Israeli retaliation and fissures in the international coalition opposing Iraq, which could result in a longer war in the Persian Gulf.

"The longer the war lasts, the more unexpected things can happen," Mr. Shasha said.

Gasoline for February delivery rose 4.03 cents a gallon on the Merc yesterday, to 63.55 cents, while heating oil for February delivery climbed 2.65 cents, to 68.46 cents.

The February crude oil contract expired yesterday. Oil for March delivery rose $1.56, to $21.88.

After the close of trading, the American Petroleum Institute, a trade group in Washington, announced that the nation's commercial stocks of gasoline and of diesel and heating oil had dropped slightly in the last week, while commercial supplies of oil were little changed.

Mr. Shasha said the drop did not indicate a shortage of either refined product but would tend to push up prices.

The American Automobile Association reported yesterday that its weekly national survey of service stations had found a slight increase in retail prices even as crude oil prices had been plunging.

The auto club said a national survey of gas stations Monday night had found that the average price per gallon of self-serve unleaded gasoline had risen half a cent in the last week, to $1.249.

During the same period, the price of a barrel of oil for February delivery fell 30.8 percent, closing at $21.30 Monday on the Merc.

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