By Chris Flood
Published: October 18 2007 03:00 | Last updated: October 18 2007 03:00
Oil prices hit a fresh record of $89 a barrel early yesterday before finishing down on the day as dealers wrestled with US inventories data and the threat of military action by Turkey in northern Iraq.
Turkey's parliament has approved a government request to allow troops to cross the border into northern Iraq to confront Kurdish militia, raising concerns over the likelihood of further destabilising violence in the Middle East.
Nymex November West Texas Intermediate fell 21 cents to settle at $87.40 a barrel after touching $89, a record. ICE November Brent lost 42 cents to settle at $83.13 a barrel.
Oil prices retreated early in the session after the latest US inventories data showed a 1.2m barrel rise in crude stocks last week, higher than the consensus forecast for a rise of 0.9m barrels.
However, prices rapidly shifted direction as the news from Turkey broke shortly after the inventories figures. A fall in crude stocks at Cushing, Oklahoma, the main delivery point for WTI, was cited by traders as supporting a push higher for oil prices. The expiry of November WTI options, also yesterday, was a key factor in market activity. Dealers said about 11,000 call options open at $90 are resulting in intense efforts by speculators to drive the price to that level and also forcing short covering by those traders who had been expecting prices to weaken.
Product prices consolidated as strength in the crude market outweighed larger-than-expected increases in gasoline and heating oil stocks.
Nymex November heating oil was fractionally higher at $2.3390 a gallon after a rise of 1.1m barrels in distillate stocks (including heating oil), compared with the consensus market forecast for a decline of 400,000 barrels.
Gasoline stocks increased by 2.8m barrels, well above the consensus market forecast for a rise of 500,000 barrels. Nymex RBOB November gasoline traded marginally weaker at $2.1725 a gallon.
The Organisation of the Petroleum Exporting Countries has blamed speculators for rising oil prices and reiterated its view that global markets remained well supplied. However, the International Monetary Fund said yesterday that oil prices were likely to remain high in the absence of a further change in Opec's quota policies or a major economic slowdown.
The IMF also said that it expected to see metals prices soften but rising production costs would limit any decline. Food prices were forecast to moderate but demand from biofuels and emerging markets would provide continued support.
In Chicago, wheat prices steadied after recent selling pressure with CBOT December wheat up 3 cents at $8.31½ a bushel. CBOT December corn slipped 2 cents to $3.58½ a bushel and CBOT November soyabeans rebounded 7½ cents at $9.85 a bushel.
Gold dipped 0.4 per cent to $756.80 a troy ounce after hitting a near 28-year high of $766.60 on Tuesday.
Platinum rose 1.8 per cent to $1,435 a troy ounce, a record, as traders highlighted signs of genuine physical scarcity indicated by rising borrowing and tightening of platinum interest rates.
Coffee prices have come under pressure this week as the first spring rains have arrived in Brazil. However, prices recovered with Euronext Liffe November Robusta coffee up 9 per cent to $2,124 a tonne after reaching a 10-year high of $2,234 Friday.
Copyright The Financial Times Limited 2007
