The price of crude oil jumped nearly $3 a barrel yesterday amid renewed concern that a peaceful solution to the standoff in the Persian Gulf may not be found before next week's United Nations-imposed deadline for Iraq to withdraw from Kuwait.
"People came in buying today and it never stopped," said Tom Blakeslee, an analyst at Pegasus Econometrics Group Inc., an oil market analysis and trading firm in Hoboken, N.J. "I think what's going on here is that a lot of traders felt the realization that there's eight days before the deadline."
The price of a benchmark barrel of high-quality crude oil for February delivery finished the day at $27.65 on the New York Mercantile Exchange -- a $2.75 increase. Prices of gasoline and heating oil futures contracts also rose sharply on the exchange.
Last week, amid optimism about the possibility of a negotiated settlement between the United States and Iraq, the price of oil dropped more than $3.50 a barrel, to the lowest levels since shortly after Iraq invaded Kuwait on Aug. 2.
Traders said yesterday's buying spree was in part a reflexive reaction to last week's decline, and many said it was difficult to point to any fresh developments that had soured last week's outlook for peace, other than a hawkish speech by Iraqi leader Saddam Hussein to his military forces over the weekend.
But they said the market appeared to be growing increasingly nervous as the Jan. 15 U.N. deadline approaches, and many said they were losing faith that Wednesday's meeting between Secretary of State James A. Baker III and Iraqi Foreign Minister Tareq Aziz would produce any sort of agreement to avoid war.
"I think there's been a general shift in attitude since last week, one that increased the prospects for war," said Michael McDermott, an oil broker at Paine Webber Inc. in New York. "Something has to give, and there doesn't appear to be a middle ground."