Crude up amid Mideast tension

Crude oil rose for the first day in three on tensions in the oil-rich Middle East, as Iran signaled a tougher stance in nuclear program talks and Turkey considered military action in Iraq.

Turkish Prime Minister Recep Tayyip Erdogan said his country's forces may attack Kurdish fighters in northern Iraq in "days".

Iran said it should set conditions for discussions with international agencies over its pursuit of nuclear technology.

"Although we believe in negotiations, we do not bargain over our rights," Iranian President Mahmoud Ahmadinejad said during a visit to Armenia, according to the Islamic Republic News Agency.

Prime Minister Erdogan said yesterday Turkey could use its military "at any time" to attack militants based in Iraq.

Crude oil for December delivery rose as much as 77 cents or 0.9 percent to $86.79 a barrel on the New York Mercantile Exchange. The contract traded at $86.33 at 1:40 pm in London.

Brent crude oil for December settlement traded 37 cents higher at $83.64 on London's ICE Futures Europe exchange.

Oil reached a record $90.07 a barrel in New York on Friday after the dollar fell against the euro and Turkish lawmakers voted to allow military action against the Kurdish rebels. Iraq holds the world's third-largest reserves of crude oil.

"The bulls are looking for a reason to buy and Iran is one thing which was on the backburner last week where now there's more fuel on the fire," said Gerrit Zambo, an oil trader at BayernLB in Munich.

Military preparations

Turkish Prime Minister Recep Tayyip Erdogan ordered preparations for a possible military strike on bases of the Kurdistan Workers' Party in Iraq, a move opposed by the United States. Iraq holds the world's second-largest reserves of crude, after Saudi Arabia.

"Any conflict in the Middle East is bad news," said Simon Wardell, energy research manager with Global Insight Inc in London.

At the same time, "there is not really as much supply under threat perhaps as the market would lead you to believe", he said. The country exports only limited quantities from its Kirkuk oilfields through the pipeline network to Turkey.

"Our analysis shows that if there is concern about the Kirkuk pipeline, it's not substantial," Nobuo Tanaka, the executive director of the International Energy Agency, said in an interview in Moscow yesterday.

Bloomberg News

(China Daily 10/24/2007 page16)