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Friday, November 16, 2007

Crude Oil Rises to Record Above $93 as Mexico Shuts Production

Crude oil climbed above $93 a barrel for the first time, extending this month's gain to 16 percent, after Mexico shut down a fifth of its production because of a storm and the dollar fell to a record low.

State-owned Petroleos Mexicanos, the third-largest supplier of crude to the U.S., halted about 600,000 barrels a day of output, spokesman Carlos Ramirez said in Mexico City. The dollar dropped to $1.4426 per euro, the weakest since the introduction of the 13-nation common currency in 1999.

Crude oil for December delivery rose as much as $1.34, or 1.5 percent, to an all-time high of $93.20 a barrel in after- hours electronic trading on the New York Mercantile Exchange. It was at $93.18 at 2 p.m. Singapore time.

``It's going crazy, shooting up way too fast,'' said Tetsu Emori, chief commodities strategist at Astmax Futures Ltd. in Tokyo. ``It's only a matter of time before it hits $100. It may be today, tomorrow or in the next few days or weeks.''

Tensions between Turkey and Iraq over Kurdish militants as well as over Iran's nuclear program are helping drive oil prices higher.

Mexico produces about 3.1 million barrels of crude oil a day. About 80 percent of the output is from the Gulf of Mexico, according to Petroleos Mexicanos, known as Pemex.

Pemex shut output of 200,000 barrels at noon New York time yesterday and was planning to idle wells that produce a further 400,000 barrels by midnight in Mexico, company spokesman Ramirez said. The wells would be closed until at least Oct. 30, Ramirez said, without elaborating.

The shutdown happened in the Bay of Campeche, the same area where 21 workers died after another storm last week caused an oil rig to hit a platform.

Brent crude oil for December settlement rose as much as $1.31, or 1.5 percent, to a record $90 a barrel on the London- based ICE Futures Europe exchange.

Dollar Weakness

The weakness in the dollar is helping boost crude oil prices, said Rowan Menzies, an analyst at Commodity Warrants Australia Pty in Sydney. The dollar fell to its lowest against the euro on speculation the Federal Reserve will cut interest rates this week as a U.S. housing slump threatens economic growth.

``The U.S. dollar is going down at a rate of knots,'' Menzies said. ``You've seen inflation-linked buying across the commodities, in oil, gold, silver and grains.''

Iran

Turkish Prime Minister Recep Tayyip Erdogan warned Oct. 27 that his country may order wider military attacks against the group's camps if needed, according to Turkish media. Turkey said it bombed PKK units in northern Iraq last week and sent troops across the border in pursuit of the militants.

On Oct. 26, the U.S. accused Iran's military of supporting terrorism and announced new sanctions on the country. The U.S. wants Iran to halt uranium enrichment that it suspects is a cover for developing nuclear weapons.

Iran is still ``at least a few years away'' from being able to build a nuclear bomb, and there is time for diplomacy to head off a military confrontation, the head of the United Nations nuclear watchdog agency said yesterday.

International Atomic Energy Agency chief Mohamed ElBaradei said on CNN's ``Late Edition'' program he hasn't seen ``any concrete evidence'' of a secret Iranian weapons program.

Nesa Subrahmaniyan
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