Crude oil rose above $88 a barrel for the first time in New York on concern Turkey may attack Kurdish militants in Iraq and disrupt oil shipments.
"This is the knee-jerk reaction to the threat of a Turkish invasion of northern Iraq," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "Whenever you see the threat of an outbreak of violence within 300 miles of a Middle East oil field, prices are going to surge."
Crude oil for November delivery rose 89 cents, or 1 percent, to $87.02 a barrel at 1:42 p.m. on the New York Mercantile Exchange. Futures reached $88.20, the highest since the contract was introduced in 1983 the sixth straight daily increase. Prices are 45 percent higher than a year ago.
"It's pretty clear that the contract has another upward leg to it," said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. "There's a lot of commodity-fund buying unrelated to the fundamentals of the market. The high prices are more and more difficult to justify, so at some point the tide will turn."
The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's oil, said current market fundamentals do not support high oil prices.
"OPEC will continue to monitor the global oil market and will respond to any supply disruption, so as to ensure the market remains well supplied during the winter months," OPEC Secretary-General Aldallah Salem El-Badri said in an e-mailed statement today from OPEC's headquarters in Vienna.
Speculators, refinery bottlenecks, seasonal maintenance work and geopolitical issues are pushing prices higher, El-Badri said in today's statement.