Oil Prices Hit $43 a Barrel
Crude oil prices shot to new highs on July 28 as markets reacted to a threat by Russian authorities to shut down most of the production from that country’s largest oil company, according to a report by the Associated Press. September contracts of U.S. light crude climbed 3 percent higher to $43.05 a barrel on the New York Mercantile Exchange — the highest level since the exchange began. Contracts of Brent crude for September delivery jumped to $39.68 a barrel on the International Petroleum Exchange, beating the previous high of $39.65 on Oct. 12, 1990, when Iraqi troops invaded Kuwait. Yukos, which produces 2 percent of the world’s oil, battered by a gigantic overdue back tax bill, said it might have to halt its main production units within a few days because of a bailiff’s order. The company says it does not have the cash to pay its tax debt, and court orders have frozen assets that it could tap to raise money. Crude supplies are already extremely tight, with Iraq’s output hampered by saboteurs and most producers already pumping as much as they can. Saudi Arabia, the only producer that still has significant spare capacity, has recently boosted its production by about 1 million barrels a day, but much of this fresh oil has yet to reach customers and replenish depleted inventories. If Yukos can no longer export, there is “some prospect” that the United States and other major oil-consuming countries might decide to tap their emergency stockpiles of crude to try to dampen prices, argued Michael Rothman, chief energy strategist at Merrill Lynch in New York.