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Oil holds record levels above $86 Oil reaches new records above $87
(about 8 hours later)
Oil prices have remained at record levels above $86 a barrel amid tensions between Turkey and Kurdish rebels in northern Iraq and output concerns. Oil prices have hit record levels above $87 a barrel amid tensions between Turkey and Kurdish rebels in northern Iraq and output concerns.
In Asian trading, US light, sweet crude rose to $86.76 a barrel - having set a record of $86.13 on Monday - while Brent crude surged further to $83.09. In European trading, US light, sweet crude rose as high as $87.97 a barrel before easing slightly to $87.55 while Brent crude surged again to $83.99.
Analysts said the rises followed reports that Turkish forces had shelled an Iraqi border village in recent days. The continued upward curve followed reports that Turkish forces had shelled an Iraqi border village in recent days.
Separately, Opec said that non-member nations were set to cut production. With global supplies tight, any threat to oil output is likely to hit prices.
About 110,000 fewer barrels of oil would be produced each day by those not part of the cartel, the oil producers' group said in a report.
Last month, Opec said that it would be boosting its production by 500,000 barrels per day from the beginning of next month to cope with resilient global demand for oil.
However, it has since added that demand for oil this winter in the US - the world's largest consumer of heating oil - will be stronger than previously thought.
Economic impactEconomic impact
The Turkish government is preparing a motion seeking parliamentary approval for a military incursion into northern Iraq after 13 Turkish soldiers were killed close to the Iraqi border.The Turkish government is preparing a motion seeking parliamentary approval for a military incursion into northern Iraq after 13 Turkish soldiers were killed close to the Iraqi border.
Ankara estimates that 3,500 Kurdistan Workers' Party (KWP) rebels - who want to see the establishment of an independent Kurdish homeland - are based across the border in Iraq.Ankara estimates that 3,500 Kurdistan Workers' Party (KWP) rebels - who want to see the establishment of an independent Kurdish homeland - are based across the border in Iraq.
All the factors in the market are bullish Tetsu Emori, Astmax Futures
Analysts said Turkey's decision to ask for permission to pursue Kurdish rebels into Iraq fuelled fears that hostilities would disrupt oil supplies.Analysts said Turkey's decision to ask for permission to pursue Kurdish rebels into Iraq fuelled fears that hostilities would disrupt oil supplies.
Oil prices have quadrupled since 2002 as a result of demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa. "Whenever there is any escalation in political tensions in the Middle East, oil markets become concerned," said a commodity strategist at the Commonwealth Bank of Australia.
The cost of oil is still below the inflation-adjusted level of about $90 a barrel witnessed in 1980. Oil prices have quadrupled since 2002 due to demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa.
But analysts believe the current price spike will inevitably have an impact on growth in the world economy, already expected to slow next year. The cost of oil is still below the inflation-adjusted level of about $90 a barrel seen in 1980 when spiralling prices helped contribute to a recession in the US.
"My guess is that you'll see it affect stock market prices and economic growth," said Ray Carbone, president of oil trading firm Paramount Options. Analysts are divided over where prices will head next, although most believe the upward pressure on prices - driven by concern about the availability of supplies - is set to continue.
Predicting the future
Further pressure on supplies came with news that oil producers outside the Opec cartel were to reduce output by about 110,000 a day.
Last month, Opec said that it would be boosting its production by 500,000 barrels per day from the beginning of next month to cope with resilient global demand for oil.
However, it has since added that demand for oil this winter in the US - the world's largest consumer of heating oil - will be stronger than previously thought.
"It is very difficult to say what will happen next," said Tetsu Emori, commodity markets fund manager at Astmax Futures.
"All the factors in the market are bullish. There are no bearish factors except maybe that the market looks like it has been overbought, technically."