The price of crude oil closed yesterday at its highest level since Iraq invaded Kuwait and gasoline futures prices hit a record high as a lack of positive news from the Middle East increased traders' nervousness.
Analysts said the prices continued to be driven higher by concern about the standoff between the United States and Iraq and OPEC's inability to agree to increase output to cover the shortfall caused by the invasion and the embargo on Iraq.
The price of a benchmark barrel of crude oil on the New York Mercantile Exchange rose $1.27 to close at $28.63, the highest close in 4 1/2 years. It was just a few cents below the recent intraday trading high of $29.05, set just after the Aug. 2 Iraqi invasion. A few weeks ago, the benchmark crude was trading at $16.50. In addition, wholesale unleaded gas for delivery in September rose as high as 96.25 cents a gallon in the futures market before closing at 95.97 cents, up 8.5 cents from Thursday's record close.
Members of the Organization of Petroleum Exporting Countries were unable yesterday to agree about the need for a meeting to discuss production levels. One OPEC faction, led by Saudi Arabia and Venezuela, wants approval from the cartel to increase production to make up for the 4.5 million barrels a day lost from Iraq and Kuwait, while another faction, including Iraq, Algeria and possibly Iran, wants to keep production down to drive the price still higher.
"The impression I'm getting right now is there's going to be a lot of confusion and stalling among the OPEC members," said Joseph Story, president of Gulf Consulting Group in McLean. "I'm not sure that there ever will be a meeting."
In that case, Story and other analysts said, Saudi Arabia, Venezuela and others would raise production unilaterally.
Even as the crude price spiraled up yesterday, one oil trader suggested that it was near a peak, absent any disastrous news developments. "We're not going to get a push over $30 unless something new happens in the Middle East," predicted Cynthia Kase Pedota, manager of oil risk at Chemical Bank in New York.
However, she said, "This is not the kind of market where anything trades fundamentally. It basically trades psychologically."