Mideast tensions send oil price soaring
By Kevin Morrison and Roula Khalaf in London
Published: May 4 2004 20:33 | Last Updated: May 4 2004 20:33

Oil prices on Tuesday reached their highest level since the lead-up to the first Gulf war amid fears over oil supplies from an increasingly violent Middle East.

The benchmark Brent futures contract peaked at $35.92 a barrel, its highest since October 1990, after Saudi militants attacked western expatriates at a petrochemical complex at the weekend. "The security premium in crude oil prices grows by the day," John Kilduff, senior vice-president of energy risk management at Fimat USA, told Bloomberg.

After climbing 83 cents on Monday the key US crude futures contract rose $1.09 to touch a new post-Iraq war intra-day high of $39.15 a barrel.

A year after George W. Bush, US president, declared "major hostilities" at an end in a war designed to bring peace and stability to the Middle East, tensions have been rising across the region.

"The Middle East is becoming a very tense place," said Seth Kleinman, energy analyst at PFC Energy. "Attacks in Saudi Arabia, Syria, [a foiled attack in] Turkey, while the resistance in Iraq is becoming more widespread. And this is set against a backdrop of the deteriorating Israel/Palestine situation, which is likely to keep violence simmering in the region."

The oil market is tight - the biggest producers are cutting supply, and demand is strong in China and the US, which is about to enter the driving season.

The first assault against an economic target in Saudi Arabia, the world's largest oil producer, came shortly after a foiled suicide attack on the Basra oil terminal in southern Iraq last week.

The shooting spree in the Saudi city of Yanbu has sent shockwaves through the expatriate community on which the Saudi economy heavily relies. The US is asking Americans to leave.

ABB Lummus, the energy arm of the Swiss-Swedish engineering and oil services group and the company whose employees were killed in the attack, has said all its expatriate staff would be pulled out of Yanbu.

Vera de Ladoucette, senior director of Middle East research for Cambridge Energy Research Associates, said any significant disruption would have widespread effect as the world's oil-producing capacity was near its limit. She said: "There is only 3m barrels a day of spare capacity, this is why the markets are nervous - because the balance between supply and demand is so tight now."

Mr Kleinman said more attacks on oil plants or terminals could send prices above $40 a barrel.

The latest price is still well below levels seen during the oil shocks of the early 1970s and 1979 following the revolution in Iran.

Mr Kleinman said the higher prices would force Opec members to produce more oil. He said: "There is more of an incentive for [Opec] to not cut back by as much, but they won't be increasing the Opec quota."

Keep in mind that Bush loves high gas prices.. why is it that in all his talk about the economy he ignores one of the largest economy killers, the cost of transortation. Because when gas prices are high the friends of Bush get richer.

This is NOT an issue of supply and demand it's simply a few very very rich people manupulating the fuel supply to make themselves richer.

ya know when we had our "energy crisis" two winters ago the prfits of all the gasoline companies reached all time higs as did gasoline prices.. That means that gas companies were increasing their prices beyond what was needed to compensate for high crude oil prices.

If gas prices hit three dollars a gallon I'll have to quit fishing and quit my job because i wouldn't be making any money. I have already cut back my driving severly.
The truth is Bush doesn't give a rip that the American people are being taken advantage of. WHy? because he has no concern for Americans. he does not care about you or me and thats the truth.

I read the other day that US oil company profits were up substantially in 2003. This year should be huge. All part of the closed door energy policy meetings imo.

"This is NOT an issue of supply and demand it's simply a few very very rich people manupulating the fuel supply to make themselves richer."

Come on Rob you can do better than that.

I sell Project Management Software. Alaska is in my territory. I spoke to a worker for one of the major oil companies who happens to work on the North Slope. I thought I was going to sell him some software for a drilling project, but he came back and said that "because the price of gas has gone so high, HQ has put all new drilling projects on hold. They don't want to increase supply right now."

Think about that the next time someone says the high prices are because those dirty environmentatlists won't let us drill for new supplies.

Time to go out and start up the Suburban....top of the morning to ya Ed

I think a lot of things in America will change drastically if gas prices continue on their present course. Gas and diesel are now as important to us as electricity and water. It affects everything we do in some way.

One thing that may be interesting to see how it plays out is if the prices suddenly drop in September or October. I don't believe that Bush had secret deals with the Saudis like many believe, but it sure will look incriminating if prices drop right before the election.

So did we really receive a tax break? Seems to me it was only a shift of money into industries like oil, natural gas and power.

Yeah, it's like, "The more it changes, the more it stays the same." My tax break wasn't all that big, but every little bit is helping now that the price of petroleum is rising. Fishing out of La Push, Astoria, and Seiku is gonna suck on the budget this summer.

"meet the new boss.............the same as the old boss."