Crude Oil Rises on Concern Mideast Violence May Disrupt Exports
By Stephen Wisenthal
Sydney, Oct. 23 (Bloomberg) -- Crude oil rose on concern about supply disruptions from the Middle East, which produces a third of the world's oil, as a week-old peace accord between Israeli and Palestinian leaders appeared to be collapsing.
Prime Minister Ehud Barak said at the weekend Israel would ``call a time-out'' in peace negotiations with the Palestinians to decide whether to keep talking. That was after an Arab summit blamed Israel for three weeks of violence which has killed more than 120 people, mostly Palestinians.
``The peace talks look like they're breaking down,'' said Peter Reilly, a futures broker at ED&F Man International Ltd. in New York. ``It's been crazy over there. People are leery of what's going to happen (with oil exports) and don't know what to expect.''
Crude oil for December delivery rose as much as 55 cents, or 1.7 percent, to $33.50 in after-hours electronic trading on the New York Mercantile Exchange. It was recently trading at $33.16, 30 percent higher than at the start of the year.
The November contract, which expired Friday, fell 3.5 percent last week amid signs violence between Israelis and Palestinians was easing.
After the Arab leaders' two-day weekend summit in Egypt concluded, however, fighting escalated near Bethlehem, with Israeli helicopters and tanks firing on a Palestinian village, Australian Broadcasting Corp. radio reported.
``Israel utterly rejects the language of threats used at the Arab summit in Cairo and condemns the call for continued violence against it,'' Barak said in a statement.
Road to Jerusalem
Palestinian leader Yasser Arafat dismissed Barak's decision to pause the peace process.
``My response is our people are continuing their road to Jerusalem, the capital of our independent Palestinian state,'' Arafat told reporters after returning to his office in Gaza City. ``Whether he accepts or does not accept, let him go to hell.''
Oil surged close to a 10-year high earlier this month on concern that confrontations could prompt Arab producers to restrict exports in support of the Palestinians. Supplies have not yet been affected, and Saudi Arabia and other producers have said they won't use oil as a weapon.
High oil prices, which threaten to slow world growth, may lead the Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's oil, to boost output quotas for a fourth time this year, as early as next weekend. OPEC's production increases in April, July and October have failed to bring oil prices below $30 a barrel.
U.S. crude supplies are close to a 24-year low as the peak demand season for heating fuel begins in the world's biggest oil market.
The oil producers' group has said it would increase production quotas by a further 500,000 barrels a day if the average price of a group of crude varieties that the group monitors stays above its target range of $22-$28 for 20 consecutive trading days.
The average price of the so-called OPEC ``basket'' of crude varieties was at $30.52 a barrel on Thursday, the 14th consecutive day above $28 a barrel since the group last increased exports on Oct. 1.
Saudi Arabia and Venezuela, two of OPEC's biggest producers, have both reaffirmed the group's commitment to the price band mechanism within the last two weeks and said the increase would be triggered ``automatically.''