Oil prices shot up more than $2 a barrel Friday as traders who were worrying about war in the Persian Gulf became even more jittery over a threat of violence in the Soviet Union, the world's largest oil producer.
"Gorbachev warned of bloodshed if the republics of the Soviet Union broke up," said Ann-Louise Hittle, a senior oil analyst with Shearson Lehman Brothers Inc.The Soviet president's comments, made at a Moscow news conference, fueled the upward surge in a market that opened bullish in response to oil prices that had risen Thursday in London on news of a shutdown at a North Sea oil facility, she said.
The facility was already being brought back on-line Friday, but the higher London prices boosted opening oil futures in New York. Crude traders then began focusing on war fears that were stirred up by President Bush's Thanksgiving visit to U.S. troops in Saudi Arabia.
Bush told the soldiers that they might soon have to provide the solution to the gulf crisis that began with Iraq's invasion of Kuwait in August.
"It heightened the sense that the possibility for war is strengthening," Hittle said.
But volume was extremely light, as many participants were taking a four-day weekend in observance of Thanksgiving, so analysts said the market's big move was somewhat exaggerated.
Ed Kevelson at Dean Witter Reynolds Inc. said traders were also buying oil on the belief that the U.N. Security Council would soon be contemplating a resolution that would authorize the use of military force to push Iraqi troops out of Kuwait. The war fears were further whipped up by news that the British were sending more troops into the gulf.
Light sweet crude oil settled at $31.90 per barrel, up $2.27, for January delivery contracts on the New York Mercantile Exchange. For the week crude for next-month delivery rose $2.53 a barrel.
The rising crude prices helped pull up futures contracts for refined petroleum.
Wholesale home heating oil was up 3.42 cents at 88.66 cents a gallon on contracts for delivery in December. For the week, next-month heating oil contracts were up 4.24 cents a gallon.
Wholesale unleaded gasoline rose 3.45 cents to 82.40 cents a gallon on contracts for delivery in December. Next-month contracts for unleaded gasoline were up 4.77 cents a gallon for the week.