Crude oil prices spiked above $92 a barrel in Asia Friday on growing tensions in the Middle East and renewed concern about oil supplies.
Light, sweet crude for December delivery rose $1.40 to settle Friday at a record close $91.86 a barrel on the New York Mercantile Exchange after rising overnight as high as $92.22, a new trading peak.
The Nymex crude contract jumped $3.36 to settle at $90.46 a barrel Thursday in the U.S., closing above $90 a barrel for the first time.
Oil prices are within striking distance of the all-time high when adjusted for inflation of $93.09 set in January 1981, according to the Energy Department.
Oil futures have risen nearly $7 a barrel, or 8%, since the government on Wednesday reported a sharp drop in crude inventories in the United States. The inventory numbers reinforced a view that oil supplies are falling at a time of year when they should be rising to meet expected strong fourth quarter demand.
Prices in futures markets for other energy goods, including gasoline, heating oil and natural gas also rose.
Behind the oil price increase:
•Supplies. U.S. oil inventories fell at the fastest pace in six weeks last week and are 4.7% lower than a year ago, the Energy Department said this week.
The USA has enough oil on hand to meet current demand for 21 days, down from 22.1 days a year ago, according to the government.
"The supply picture has tightened up," A.G. Edwards energy analyst Eric Wittenauer says.
•Middle East. Tensions in the oil-rich Middle East appear to be intensifying. Investors have been concerned for weeks that a Turkish attack on Kurdish rebels could halt oil supplies from northern Iraq. Thursday, the Bush administration announced economic sanctions on Iran's banks and Revolutionary Guard, accusing the nation of continuing to pursue nuclear weapons capability and supporting terrorism.
Although the USA does not import oil from Iran, the world's fourth-largest oil producer, there is concern that if broader sanctions were imposed on that nation, there would be less oil on the world market.
•Other violence. The market was unsettled by a dawn attack Friday on an oil vessel off the coast of Nigeria by anti-government militants.
•Investors. Oil and other commodities have become a popular investment in recent weeks amid economic and interest rate uncertainty. The increase in investors is likely helping to fuel oil's rise.
•OPEC. The Organization of Petroleum Exporting Countries has been largely silent despite the price jump. OPEC last month pledged to boost output Nov. 1. But the move has been seen as being too small to offset rising world demand.
The increased prices are expected to be seen in higher costs for a number of items, including heating oil and gasoline. But the oil price gains have come after the peak driving season, meaning there will be less price momentum for gasoline than there would have been if the increase had hit in the summer.
"If crude oil doesn't drop precipitously … gasoline prices will follow, but not as quick, not as steep" as oil, says Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.
At the pump, meanwhile, gasoline prices continued their delayed reaction to the recent increase in oil prices. The national average price of a gallon of gas rose 0.3 cents overnight, to $2.823 a gallon, according to AAA and the Oil Price Information Service.
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