Posted on 04/02/2002 1:04:58 PM PST by Tumbleweed_Connection
Oil futures marched higher again Tuesday as continuing trouble in the Middle East raised the possibility that Persian Gulf crude exports to the United States could be reduced to protest Israel's military incursions into the Palestinian Authority.
Some analysts downplayed the possibility that OPEC would take the economic risks associated with cutting off a key customer, but traders appeared unwilling to take a chance on being caught short with the summer driving season approaching.
"For the oil markets, what's happening means a risk of less oil on the market and not more," Merrill Lynch oil analyst Michael Rothman said Tuesday on an Energy News Live Web cast. "That's why you are getting this huge knee-jerk reaction up."
May crude futures passed $27 a barrel early on the New York Mercantile Exchange and briefly broke through $28 before retreating slightly as the trading day entered the home stretch. The surge in crude also pulled gasoline, heating oil and natural gas higher.
London's International Petroleum Exchange resumed trading Tuesday after the three-day Easter weekend and saw benchmark May Brent crude jump $1.42 to $27.34 a barrel.
The long-running conflict between Israelis and Palestinians has historically not had much effect on oil prices because neither exports any crude, and OPEC has been unwilling to sacrifice its oil revenues and market share for the sake of trying to pressure Israel by squeezing the United States as it did during the 1973 oil boycott.
'1973 Was a Huge Mistake'
"Most countries' OPEC delegates will tell you that 1973 was a huge mistake, and there is no reason to believe that thinking has changed," said Rothman.
Nevertheless, Iraq has been loudly calling for some kind of a boycott and plenty of buyers appear willing to stock up even if a cooling of tensions in the Middle East kicks the legs out from under the rally. Iraq's crude exports actually increased last week by more than 2 million barrels a day at an average price of $22.70 a barrel, according to the United Nations.
Traders will get a better handle on the U.S. supply situation after the closing bell when the weekly American Petroleum Institute inventory report is released.
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