Oil tops $85 for the first time

Oil prices kept rising Monday after closing at a new record in the previous session on worries that supplies are insufficient to meet coming winter demand and concerns over the conflict between Turkey and Kurds in northern Iraq.

Light, sweet crude for November delivery added $1.13 to $84.82 a barrel in electronic trading on the New York Mercantile Exchange, midday in Europe, rising to a new high of $85.19 before receding slightly.


The contract rose 61 cents to settle at a record $83.69 a barrel on Friday after rising as high as $84.05.

Brent crude futures rose $1.16 to $81.71 a barrel on the ICE futures exchange in London.

Recent reports have indicated that crude inventories are falling. Last week, the U.S. Energy Department reported that U.S. oil supplies declined in the week ended Oct. 5, while the International Energy Agency said that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.

"One of the factors that has provided underlying support to oil prices in recent weeks has been concerns that if we move into the Northern (Hemisphere) winter that oil market conditions are likely to remain tight," said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.

Some analysts think the supply shortfall in last week's U.S. Energy Department inventory report is an anomaly. They doubt demand is as strong as recent forecasts by the department and the IEA suggest. These analysts expect oil prices will soon begin a seasonal decline to $70 a barrel, or lower.

Prices were also supported by worries that Turkey could take unilateral military action against Kurdish rebels in northern Iraq, following comments by the Turkish prime minister Friday that suggest Turkey will not worry about the diplomatic consequences of such an incursion.

"The main risk to supplies is currently on an escalation of the Turkish army, Kurdish militants conflict, where we believe the risk for disruptions to the Mediterranean supplies would be real," said Olivier Jakob of Petromatrix in Switzerland.

U.S. Secretary of State Condoleezza Rice on Saturday urged Turkey to show restraint in its response to attacks from Kurdish rebels, but Turkish leaders have appeared to be less receptive to Washington's appeals since a committee of U.S. lawmakers passed a resolution last week labeling as genocide the World War I-era killings of Armenians by the Ottomans -- a characterization that Turkey rejects.

Nymex heating oil futures rose 1.92 cents to $2.2656 a gallon while gasoline prices added 1.74 cents to $2.1025 a gallon. Natural gas futures rose 20.3 cents to $7.177 per 1,000 cubic feet.

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