Oil surges to record $88.20

Oil thundered to a new peak above $88 a barrel on Tuesday [16 Oct 2007] as investors eyeing supply concerns and tensions in northern Iraq extended the nine-dollar rally that started last week. U.S. crude settled up $1.48 at $87.61 a barrel, easing off the earlier record high of $88.20. London Brent rose $1.41 to $84.16 a barrel. Oil prices, averaging $67 this year, are closing in on the inflation-adjusted high of $90.46 seen in 1980, the year after the Iranian revolution and at the start of the Iran-Iraq war.

Investors said the rally was supported by tensions between Turkey and Kurdish separatists in northern Iraq, world energy demand growth, tight inventories in consumer nations heading into winter and unprecedented weakness in the U.S. dollar. "This market has it all right now," said Peter Beutel, president of energy trading consultant Cameron Hanover. "It has supply concerns, projected increases in demand, dollar weakness, momentum and political fears."

The Turkish cabinet asked parliament Monday for permission to launch an attack on Kurdish separatists in northern Iraq, dimming hopes for a recovery in Iraqi oil exports via Turkey, which have been sporadic since 2003. Turkey is also a major conduit for Caspian oil exports to the Mediterranean.

- Welcome to $88 oil. We're within striking distance of $90 now.

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