Top Financial News

10/20 16:25 Crude Oil Gains on Worst Day of Mideast Violence in Two Weeks By Mark Shenk

New York, Oct. 20 (Bloomberg) -- Crude oil rose more than 3 percent as the deadliest day of violence in two weeks between Israelis and Palestinians renewed tension in a region where a third of the world's oil is produced.

At least nine Palestinians were killed in clashes with Israelis today. The two sides blamed each other for the violence that erupted just days after a cease-fire agreement. Arab leaders will meet this weekend to develop a united policy toward the strife. Arab nations alone pump about a quarter global supply.

``The markets were nervous'' before the weekend summit, said John Kilduff, senior vice president of energy risk management at Fimat USA Inc. ``There was an upsurge of violence, and prices rose with the death toll.''

Crude oil for December delivery rose $1.05, or 3.3 percent, to $32.95 a barrel on the New York Mercantile Exchange. The November contract, which expired today, rose 84 cents to $33.75 a barrel.

In London, Brent crude oil for December settlement rose 88 cents, or 2.9 percent, to $31.62 a barrel on the International Petroleum Exchange.

Oil prices had retreated from close to a 10-year high last week, after Israeli Prime Minister Ehud Barak and Palestinian leader Yasser Arafat agreed to condemn violence that has killed more than 110 people in three weeks.

Barak will likely call for a pause in the peace process to reassess the country's position after the Arab summit in Cairo, government spokesman Avi Pazner said. Israel has fulfilled its commitments under the agreement and the Palestinians haven't, he said.

In Egypt

Arafat, in Egypt for the meeting of Arab leaders, said the agreement with the Israelis was ``the essential thing that we are going to discuss.''

The tension between the two sides ``clearly justifies a premium on the price of oil and a sensitivity to any increase in violence in the region,'' said Lawrence Eagles, head of commodities research at GNI Ltd. in London.

Oil surged last week on concern that confrontations could spur Arab producers to restrict exports in support of the Palestinians. Supplies have not been affected.

Kuwait, the sixth-largest producer in Organization of Petroleum Exporting Countries, said it would not be in Arab interests to cut oil supplies in response to Israel's attacks on Palestinians, Agence France-Presse reported.

Speculation that OPEC will raise production for a fourth time this year may intensify, as the trigger date for the group's so- called price band mechanism approaches.

OPEC has an informal accord to raise output by 500,000 barrels a day if its oil benchmark tops $28 a barrel for 20 consecutive trading days, starting Oct. 1. The 20th day would be next Friday. The price stood at $30.52 a barrel yesterday.

Venezuelan President Hugo Chavez said yesterday he wanted to see crude prices stabilize within OPEC's target range of $22 to $28 a barrel, Reuters reported. Chavez, whose country is OPEC's third-biggest producer, has on previous occasions signaled support for higher prices.

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-- Martin Thompson (mthom1927@aol.com), October 20, 2000