Crude oil futures jumped to their highest level in about a month early Wednesday, spurred by the supply implications of Turkish air strikes inside Iraq in a volatile trading session.
Light, sweet crude for February delivery was recently up $1.33, or 1.4%, at $95.46 a barrel on the New York Mercantile Exchange after climbing to $95.65, the highest intraday price since Nov. 27. Brent February crude on the ICE futures exchange rose $1.41 to $94.11 a barrel.
Crude futures received a boost in early screen trading after the Turkish military announced its warplanes hit eight suspected Kurdish rebel hideouts in northern Iraq Wednesday, the third cross-border air assault in 10 days.
Iraq produced 2.32 million barrels of oil a day in November, according to the International Energy Agency, or about 2.7% of the world's oil supply. As much as 400,000 barrels a day is exported north across Iraq's border with Turkey.
News of the air strike was "somewhat supportive," said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.
The market is also trading in anticipation of another drawdown in U.S. oil stocks to be reported Thursday in weekly oil inventory statistics from the U.S. Energy Information Administration. Analysts polled by Dow Jones Newswires expect U.S. crude stocks to fall by 1.2 million barrels, making the sixth weekly draw in a row.
Distillate inventories, which include heating oil and diesel fuel, are seen coming down by about 600,000 barrels, according to the analysts' average, while gasoline stockpiles are seen growing by 1.6 million barrels.
Thin volumes from a holiday week are expected to be even more pronounced Wednesday, as many London-based traders take off on Boxing Day. That could lead to a volatile session.
"Activity may remain subdued - at least on the volume side of it - through the end of 2007," said Peter Beutel, president of New Canaan, Conn.-based Cameron Hanover, an energy risk management firm. "We do often see these thin conditions as being conducive to unexpected moves, though. If a small, determined group of traders wants to see $100 (a barrel), this could be a good time to push for it."
Front-month January reformulated gasoline blendstock, or RBOB, rose 4.70 cents, or 2% to $2.4310 a gallon. January heating oil climbed 3.53 cents, or 1.4%, to $2.6300 a gallon.
Copyright (c) 2007 Dow Jones & Company, Inc.
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