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Oil prices hit new 10-year high on Kuwait-Iraq worries Iraq, accusing Kuwait of draining its oil, also says it won’t meet production goals due to lack of spare parts, materials by The Associated Press
Oil prices surged to a new 10-year high on the New York Mercantile Exchange in mid-September amid worries about increased tensions between Kuwait and Iraq.
Crude for delivery in October hit a new benchmark of $36 a barrel Sept. 15 before settling at $35.92, up $1.85, surpassing a previous 10-year high of $35.85 set earlier in the week. The last time oil prices were this high were in October 1990.
The Sept. 15 price surge was set off by a number of factors.
The previous day, Iraq accused Kuwait of digging wells that allow it to steal Iraqi oil and warned that it will take proper measures to stop its neighbor’s actions.
“The rulers of Kuwait have been, in the past few years, digging oil wells aimed at bleeding reserves in the border area,” the official Iraqi News Agency quoted Oil Minister Amer Mohammed Rashid as saying.
The statement came one day after Rashid announced that Iraq, which sits on the world’s second-largest oil reserves after those of Saudi Arabia, would not be able to reach its goal of pumping 3.4 million barrels a day by the end of the year due to the unavailability of spare parts and materials. U.S. weather threat Meanwhile, the threat of a hurricane in the Gulf of Mexico that might limit production also contributed to trader jitters.
Traders also had mixed interpretations of comments by President Bill Clinton, who said Sept. 15 that he doesn’t believe that high crude prices will plunge the U.S. economy into a recession.
Clinton said he did not think there was a risk of a recession in America “in the short to medium term.”
He said the United States has made a major effort over the last 25 years to develop a more diverse economy, less vulnerable to oil price spikes.
“We have withstood this oil price spike very much better than we did when it happened before,” the president said. “Now, what we need to do is watch the situation closely. The market is still sorting out what to do with the recent OPEC announcement and I think there will be an evaluation of what the production schedules are — who does what in the various countries, how quickly.”
Some took it to mean that the Clinton administration would not tap into the Strategic Petroleum Reserve. Later, however, White House spokesman Joe Lockhart told reporters Clinton has made no decision about tapping the 600-million-barrel strategic reserve. OPEC increase may not be enough OPEC ministers agreed Sept. 11 to increase production by 800,000 barrels a day, but OPEC President Ali Rodriguez warned Sept. 12 that “it remains to be seen” whether the OPEC increase will be enough to push prices lower.
While Saudi Arabia is the producer with most significant spare capacity, he said five of the other 10 OPEC members have nearly 2 million barrels of spare capacity. He named the United Arab Emirates, Venezuela, Nigeria, Iran and Kuwait.
OPEC raised its target output for the third time this year. Its new target output, effective Oct. 1, is 26.2 million barrels a day from 25.4 million barrels a day. OPEC ready to increase production OPEC secretary-general Rilwanu Lukman told a British Broadcasting Corp. radio phone-in program Sept. 17 that OPEC was ready to supply a further 500,000 barrels a day if the price remains over $28 a barrel at the end of October.
Lukman told the BBC oil producers were not to blame for the current high prices.
“Most analysts would tell you there is no shortage of goods in the marketplace — the problem is elsewhere, but people choose to look to oil producers as scapegoats,” he said.
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