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Oil surge matches record levels | |
(about 5 hours later) | |
Oil prices have matched record highs - spurred by supply concerns and tensions between Turkey and Kurdish rebels in northern Iraq. | |
US light, sweet crude was trading at $87.99 a barrel having touched $88.20 - equalling Tuesday's record - while Brent crude was up 24 cents to $83.79. | |
The price surge followed reports that Turkish forces had shelled an Iraqi border village in recent days. | The price surge followed reports that Turkish forces had shelled an Iraqi border village in recent days. |
With global supplies tight, any threat to oil output is likely to hit prices. | With global supplies tight, any threat to oil output is likely to hit prices. |
Economic impact | Economic impact |
The Turkish government is set to give the army permission for a military incursion into northern Iraq after 13 Turkish soldiers were killed close to the Iraqi border. | |
Oil prices are likely to remain high in the absence of a further change in OPEC quota policies or a major global slowdown IMF Q&A: What's driving oil prices? | |
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. |
The market has not been as worried over a geopolitical issue since last July when Israel and Hezbollah guerrillas battled in Lebanon, said Steve Rowles, an analyst with CFC Seymour in Hong Kong. | The market has not been as worried over a geopolitical issue since last July when Israel and Hezbollah guerrillas battled in Lebanon, said Steve Rowles, an analyst with CFC Seymour in Hong Kong. |
He predicted that "overall the tensions will eventually subside," saying that Iraq "isn't the oil producer that it once was". | |
Oil prices have quadrupled since 2002 because of strong demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa. | |
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. | 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. |
Opec output | Opec output |
Analysts are divided over where prices will head next, although most believe the upward pressure on prices - which is also being driven by concern about the availability of supplies - is set to continue. | |
Further pressure on supplies came with news that oil producers outside the Opec cartel were to reduce output by about 110,000 a day. | 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. | 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. | 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. |
"Oil prices are likely to remain high in the absence of a further change in Opec quota policies or a major global slowdown," the International Monetary Fund said. |