Originally created 04/27/04

Crude futures gain as oil terror worries stick



NEW YORK -- Crude oil futures settled 1.4 percent higher Monday on the New York Mercantile Exchange, as traders remained nervous following weekend attacks targeting Iraqi oil facilities.

Nymex light, sweet crude futures set for June delivery settled 51 cents higher at $36.97 a barrel following a rush of buying by traders, particularly locals and well-financed speculators. At its intraday high, the contract reached $37.15.

On London's International Petroleum Exchange, June Brent blend crude futures settled up 49 cents at $33.58 a barrel after touching a high of $33.90.

Some market participants were openly worried that the attacks might mark a potential turning point in the way al-Qaida strikes at Western interests.

"This isn't just insurgents doing this, it's al-Qaida," said DeCarlo Larry, an energy analyst for bank ABN Amro Inc. in New York. "They're looking at the big picture. The best way of attacking America is attacking our economy."

Al-Qaida has never before been known to directly target oil commerce or facilities, with the possible exception of a 2002 attack against a French tanker off Yemen for which it is suspected.

The attacks on Iraq's Basra and Khor al-Amaya oil terminals Saturday were mostly thwarted by coalition and Iraqi authorities, but the seaborne terrorists still managed to detonate their three boats. Their efforts disabled Iraq's biggest terminal for more than 24 hours and left three Americans dead who interceded the ambush.

Crude exports from Basra oil terminal resumed late Sunday, with loadings at the same flow rate as before the attacks, Iraq Oil Minister Ibrahim Bahar al-Uloum said Monday. Iraq has the world's second-biggest store of proven oil reserves next to Saudi Arabia.

Indeed, militant Abu Musab al-Zarqawi, who declared al-Qaida's responsibility Monday on an Islamist Web site, said the group had the economy in mind when it targeted the offshore Iraqi terminals.

A message from the Jordanian militant posted on the site, which often carries statements from al-Qaida and other militant groups, said the perpetrators were "determined to strike the sensitive points of the infidels' economy."

Market participants said the fact that Iraqi oil facilities remained so vulnerable was worrying, but many weren't ready to interpret the attack as the opening of a new front in global terrorism.

"On one isolated attack you can't say we're entering a new era," said Andrew Lebow, an energy broker for Man Financial Inc., a New York brokerage firm. "I think people may be covering short positions based on that, but I wouldn't buy strictly based on that."

Basra oil terminal and Khor al-Amaya were exporting around 1.7 million barrels of oil a day before the attacks. Iraq exports another 300,000 barrels a day from its northern oil pipeline to Ceyhan in Turkey. That pipeline has been the target of numerous sabotage attacks.

Jitters stemming from the weekend attack also spurred gains Monday in refined-product futures.

May gasoline futures jumped 1.76 cents, or 1.5 percent, to settle at $1.1822 a gallon after touching a new intraday high of $1.1880 - just below the all-time front-month high of $1.1930 a gallon achieved Thursday.

May heating oil futures settled up 1.58 cents, or 1.7 percent, at 93.27 cents a gallon after touching a high of 93.90.

May natural gas futures surged 19.3 cents to settle at $5.764 per 1,000 cubic feet.