Oil prices, which many analysts expected to drop significantly once members of OPEC began making up for oil lost in the embargo of Iraq and Kuwait, are continuing to move stubbornly upward, and many experts now believe they will stay higher for some time.
The prices are being pushed up by newfound concerns that a long-term standoff is developing between the United States and Iraq, worries about winter supplies of heating oil and simple market speculation by oil buyers and users, many of whom are said to be stockpiling supplies of crude oil and petroleum products to guard against future price increases or supply shortages.
The price of a contract for a benchmark barrel of crude oil rose $1.66 yesterday, to $31.43, on the New York Mercantile Exchange -- the highest price since oil peaked at $32.35 a barrel two weeks ago. The current price is almost twice as high as the price of crude oil in early July.
Prices of oil products also rose sharply yesterday, with unleaded gasoline contracts rising 2.80 cents to 95.07 cents a gallon on the New York Merc and heating oil contracts rising 4.87 cents to 88.24 cents on the exchange.
Analysts said the price increases reflect deep-seated concern about future supplies of both crude and petroleum products and the absence of favorable news from the Middle East.
"The price run-up originally was based on psychology and insecurity. Now the price run-up is based a little bit on considerations of supply," said Roger Gale, president of Washington International Energy Group, a consulting firm. "If the situation doesn't get any worse, we'll stay in the low $30-a-barrel range."
"I think the crisis is beginning to bite," said Arnold Safer, president of Energy Futures Group, a consulting firm in Washington. "The expectations of a prolonged stalemate, on the political side, on the military side, are beginning to settle on the market."
Analysts said the prospect of a stalemate was pushing prices higher by fueling concern that oil supplies would remain tight for the foreseeable future, that high-quality Iraqi and Kuwaiti crude oil would continue to be replaced by lower quality crudes, and that the world would have no excess production capacity to handle additional shortfalls.
"People are starting to talk about $35-, $40-, $50-a-barrel crude. My numbers would project the market to about $36. And that's presuming no shooting," said Michael McDermott, an oil trader for PaineWebber Inc. in New York.
"With a shooting war you could go substantially higher. If we stay in a stalemated condition, I think we're going to work gradually higher for the rest of the year."
Other analysts, however, said they continue to believe that prices will recede somewhat.
"I don't think we've moved permanently into $30 oil," said Paul Mlotok, an oil-industry analyst for Morgan Stanley & Co. in New York.