Crude surge to new high offers little hope for relief
October 25, 2007
by Josh Sosland
NEW YORK — Dramatic strength in commodity prices has been cited in recent weeks and months by numerous consumer packaged foods company executives as a major headwind undermining efforts to improve profitability. As far as energy prices are concerned, little relief appeared to loom.
While a number of markets, most notably wheat prices, have slipped from record highs, the New York Mercantile Exchange quote for crude oil moved above $90 a barrel Oct. 25, a new record high, prompting many market observers to ask when the $100 mark would be reached.
The latest rally was prompted by a number of developments, beginning with Department of Energy data indicating crude oil supplies falling to the lowest levels since January. Also contributing to the price strength was ratcheted up tensions with Iran in the aftermath of newly announced sanctions, concerns about possible Turkish attacks against Kurdish fighters in Iraq and continuing weakness in the value of the U.S. dollar. The Turkey/Kurd conflict’s impact on the oil market reflects the concentration of Iraq’s oil reserves in northern Iraq, an area controlled by the Kurds.
Oil price strength also was fueled by remarks by Abdalla El-Badri, secretary-general of the Organization of the Petroleum Exporting Countries. A day after U.S. Energy Secretary Samuel Bodman called on OPEC to increase production, Mr. El-Badri brushed aside the request, stating that current supplies were plentiful and that price strength was being driven by political unrest.