Oil Shoots to $41 a barrel as a result of this and other scary news; Wall Street Journal.
The news followed a Time magazine report that the Federal Bureau of Investigation sent a classified intelligence bulletin last week to 18,000 local law-enforcement agencies warning “recent terrorist attacks and incidents occurring overseas highlight terrorists’ interests in targeting energy-related infrastructures.” The bulletin said officials are tracking several “suspicious incidents” in the country.
Oil Shoots Above $41 a Barrel
For First Time Since Early June
‘Fear Premium’ Returns
Amid Fears of Terror Strikes
On Global Shipping Sites
By MASOOD FARIVAR
DOW JONES NEWSWIRES
July 15, 2004; Page C2
NEW YORK — Oil prices shot above $41 a barrel for the first time since a spike in early June amid new fears of terrorist attacks on global oil facilities and data showing a decline in U.S. inventories.
At the New York Mercantile Exchange, crude-oil futures for August delivery jumped as high as $41.05 a barrel, the highest price level since June 2, when oil futures set a high of $42.45 a barrel following terrorist attacks in a Saudi oil town. The August contract settled at $40.97 a barrel, up $1.53 on the day.
As in the early June price spike, fear that terrorists intend to disrupt global oil supplies triggered yesterday’s rally. In this case, the catalyst was news that some tanker operators are having second thoughts about loading Iraqi oil amid security concerns.
Shipbrokers said a South Korean oil tanker refused this week to load at Iraq’s southern terminal of Basra because of terrorism concerns. It was the second foreign tanker in a week to refuse to load there. Most of Iraq’s exports of about 1.7 million barrels a day are loaded at the Basra terminal.
The news followed a Time magazine report that the Federal Bureau of Investigation sent a classified intelligence bulletin last week to 18,000 local law-enforcement agencies warning “recent terrorist attacks and incidents occurring overseas highlight terrorists’ interests in targeting energy-related infrastructures.” The bulletin said officials are tracking several “suspicious incidents” in the country.
The report added to what traders refer to as a “fear premium,” or an increase in oil prices to hedge the potential for supply disruptions caused by terrorist attacks.
“The fear premium is back in the market,” said Tony Rosado, a trader with Zone Energy Inc. in New York. “As the terror fear rises, we need to worry about $45 to $50 oil.”
Earlier in the session, traders had largely shrugged off government data showing U.S crude-oil stocks fell by an unexpected 2.1 million barrels last week to 302.9 million barrels. The inventory figures later took on a new dimension.
The inventories report “didn’t provide us with the type of cushion that can make us feel comfortable with the threat of terror against the oil industry,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
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