Crude oil prices rose yesterday by more than $10 a barrel. As you can see from the attached chart, from the New York Mercantile Exchange, prices were trending down Tuesday and Wednesday. They were flat through Thursday morning in the neighborhood of $122 a barrel. Then, Thursday afternoon, came the start of the spike that continued until Friday afternoon.
So ... what happened? Trading at the New York Mercantile Exchange may have been driven (I say "may" because I'm guessing) by a combination of news items that together suggest further violence in the Middle East and, accordingly, more supply disruptions.
Item: On Thursday, the Turks and Iranians announced that they had launched co-ordinated attacks against Kurdish rebels in the north of Iraq. Condi Rice met with Turkish officials on the subject and released a statement that didn't mention the Iranian role at all, but did say that the Turks and the US are "on the same page" as against the rebels.
Item: a deputy prime minister of Israel said: "If Iran continues its nuclear weapons program, we will attack it."
Item: There's been a new outbreak of violence in Sri Lanka in recent days, including two bus bombings in the capital city Friday. The guerillas, a/k/a/ the Tamil Tigers, demand a separate homeland in the north of the island nation.
Consequence? The rise in the price of a barrel Friday (forget the start of the run-up Thursday) was the equal of the WHOLE price of a barrel in 1998.
If the sense of imminent doom passes over this weekend and things calm down a bit, contracts will lose some of this value in trading again next week.
But I'm still just guessing.
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