Crude oil traded on Monday in New York above 86 US dollars a barrel on concern oil shipments may be disrupted if Turkish forces pursue Kurdish militants in Iraq.
Prices climbed as much as 3% after Turkish Prime Minister Recep Tayyip Erdogan formally asked Congress to sanction military action against rebels based in Iraq, holder of the world's third-largest oil reserves. Oil also gained as the dollar fell to a two-week low against the Euro and U.S. equities declined the most in two months. Crude oil for November delivery was at 86.35 US dollars a barrel, up 22 cents, in after-hours electronic trading on the New York Mercantile Exchange. Turkish lawmakers have been asked to approve legislation allowing the military to launch attacks on bases of the Kurdistan Workers' Party, or PKK, during the next year. Last week, Erdogan said there were no plans for immediate action. Iraq's oil-rich northern region is controlled by a semi-autonomous Kurdish administration. Oil pipelines run through southern Turkey where many of the PKK attacks have occurred. Monday's intraday high passed the previous all-time inflation- adjusted record reached in 1981 when Iran cut oil exports. The cost of oil used by U.S. refiners averaged 37.48 a barrel in March 1981, according to the Energy Department, or 84.73 in today's dollars. Crude-oil and other commodities also rose because the U.S. dollar declined against the Ero, enhancing their appeal as an investment. The Standard & Poor's 500 Index fell 0.8% to 1,548.71 after Citigroup Inc., the largest U.S. bank said loan defaults will plague the financial industry for the rest of the year. In U.S. dollars, West Texas Intermediate, the New York-traded crude-oil benchmark, is up 41% so far this year. Oil is up 31% in euros, 35% in British pounds and 39% in Yen Brent crude oil for November settlement rose 2.20, or 2.7%, to close at a record 82.75 a barrel on the London-based ICE Futures Europe exchange. OPEC members have said a falling dollar justified higher prices because oil-producing countries sell oil in dollars and often buy goods in Eros. OPEC will discuss the impact of the falling dollar when members meet on December 5 anticipated Algerian Oil Minister Chakib Khelil.