Oil Surges; Violence Sparks Panic Buying

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Oil Surges; Violence Sparks Panic Buying October 12, 2000

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By Andrew Mitchell

NEW YORK (Reuters) - U.S. oil prices hurtled higher on Thursday as fears grew that rising violence in the Middle East could hit the region's oil output at a time when U.S. energy supplies are running perilously low.

November crude on the New York Mercantile Exchange (NYMEX) up $2.95 to $36.20 a barrel by 10:45 a.m. EDT after Israeli forces attacked Palestinian President Yasser Arafat's West Bank headquarters and an explosion holed a U.S. Navy destroyer in Yemen.

Frantic buying briefly pushed prices up to $37 after Israeli helicopter gunships fired missiles at Palestinian targets in the West Bank city of Ramallah following the killing of two Israeli soldiers by a Palestinian mob.

``There's panic buying going on,'' said a NYMEX trader from ABN-Amro. ``This market is going up, but I can't tell you where it will stop, we're like looking for war alerts now,'' the trader said, as news headlines flashed on all corners of the NYMEX trading floor in lower Manhattan.

At least two people were hurt in the attack on Yasser Arafat's headquarters and the police station where hours earlier hundreds of Palestinian youths had stabbed the two Israelis to death.

But the Palestinian leader, who also has a headquarters in self-ruled Gaza City, was not there. Witnesses said helicopters were also hovering over Arafat's Gaza headquarters.

The news added three dollars to gains already made as a U.S. Navy spokesman said four U.S. sailors were killed and one went missing after a rubber raft loaded with explosives slammed into the USS Cole in the southern Yemeni port of Aden.

He said that no one had claimed responsibility for the blast. Yemeni officials confirmed the explosion, but declined to comment on whether it was intentional.

Tension was high elsewhere in the region after youths stormed a Palestinian police station in the West Bank and stabbed to death the two captured Israeli soldiers.

The killings seemed certain to inflame feelings and threaten intensive international efforts to end Israeli-Palestinian violence in which at least 97 people have been killed, all but seven of them Palestinians or Israeli Arabs.

Traders worried that wider regional tensions spilling over from the conflict could endanger supplies from oil powerhouses such as Saudi Arabia, Iran and Iraq.

U.S. prices are now back near decade highs struck at $37.80 last month before President Clinton ordered the release of some 30 million barrels of crude oil from the Strategic Petroleum Reserve to try and head off winter supply crunch.

The American Petroleum Institute (API) said on Tuesday that there is 51 percent less heating oil in East Coast stocks than in early October 1999. The East Coast, particularly the Northeast, is highly dependent on this fuel for heating homes and offices.

The Department of Energy said on Thursday that heating oil stocks fell a further 1.3 million barrels last week to 46.6 million.

Analysts have warned that the SPR release -- which initially cut crude prices some seven dollars to nearly $30 a barrel -- has done little to improve availability of heating oil in the key U.S. northeast consumption center.

http://www.individual.com/story.shtml?story=c1012111.302

-- Martin Thompson (mthom1927@aol.com), October 12, 2000


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