LONDON - Oil prices jumped Wednesday to a record high 89 dollars on simmering tensions in the crude-rich Middle East that could further stretch tight global energy supplies, traders said.
New York's main futures contract, light sweet crude for delivery in November, hit an historic 89.00 dollars per barrel exactly in late afternoon deals on Wednesday.
Brent North Sea crude for December delivery rose as high as 84.43 dollars per barrel. The November contract had expired Tuesday after hitting an all-time high of 84.49 dollars.
The Turkish parliament voted Wednesday to allow its government to send troops into northern Iraq to crack down on Kurdish rebels. Many of Iraq's largest oil fields are located in the north of the troubled country.
At the same time, US President George W. Bush said he has warned world leaders they must prevent crude producer Iran from getting nuclear weapons "if you're interested in avoiding World War III."
Prices have gained more than four dollars since Monday and now threaten to break the psychologically-important 90-dollar barrier.
"You've got the backdrop of a very tight supply-demand balance, but obviously the potential of any conflict in the Middle East just simply raises those risks quite substantially, given the fact that OPEC ... doesn't think there is any need to raise production," said analyst Simon Wardell at Global Insight.
OPEC chief Abdalla Salem El-Badri had Tuesday expressed "concern" at the price spike but argued that current levels did not reflect the true state of supply and demand.
In Ankara on Wednesday, a government motion seeking a one-year authorisation for one or multiple raids into northern Iraq was approved by the Turkish parliament. The motion said the timing and the scope of an operation as well as the number of soldiers to be sent will be determined by the government.
It also stressed that any incursion would solely target the separatist Kurdistan Workers' Party (PKK), who Ankara accuses of using the region as a jumping board for attacks across the border on Turkey.
"Geopolitical concerns have resurfaced with the possibility of an incursion of Turkish forces into Iraq," added Standard Chartered analyst Helen Henton.
"While the direct impact of any conflict in Northern Iraq on oil exports is potentially quite limited, the markets are pricing in a wider scale disruption to the region, including some key pipeline routes through Turkey."
Iraq's volatile crude output averaged 1.9 million barrels per day (mbd) over the last year, according to Henton.
Traders also looked to George W. Bush, whose comments have reignited market fears about the Iranian nuclear crisis.
"We've got a leader in Iran who has announced that he wants to destroy Israel," Bush said at a White House press conference on Wednesday, after Russia cautioned against military action against Tehran's suspect atomic program.
"So I've told people that, if you're interested in avoiding World War III, it seems like you ought to be interested in preventing them from having the knowledge necessary to make a nuclear weapon," said Bush.
With the focus on geopolitics, traders set aside news of rising oil stockpiles in the United States, which is the world's biggest energy consumer.
The US Department of Energy said Wednesday that American crude reserves jumped 1.8 million barrels in the week ending October 12, beating analysts' consensus forecasts of 1.05 million.
Stockpiles of distillates, which include diesel and heating oils, leapt by 1.0 million barrels. That contrasted with market expectations for a drop of 750,000 barrels.
burs-rfj/jmy
10/17/2007 16:55 GMT