- Compliance check results in underage citations at four Cape bars (7/19/17)1
- Isle Casino to host wide-ranging career fair Wednesday (7/16/17)
- Lying police? Missing files, lost evidence: Newspaper investigation reveals glaring details in David Robinson case (7/16/17)2
- Buffalo Wild Wings to hold fundraiser Wednesday for ailing Cape officer (7/19/17)1
- 49-year-old homicide victim found in Cape (7/20/17)
- Sikeston detective's files about murder suspect missing from DPS (7/18/17)1
- Witnesses make claims of officer corruption in Box/Robinson case (7/17/17)1
- Cape city, civic leaders unveil downtown trolley service (7/14/17)6
- Park official: 5-year-old girl nearly drowns at Cape Splash, taken to hospital (7/12/17)4
- Business notebook: Jackson boutique has regional roots in retail (7/17/17)
U.S. crude prices reach 21-year high after threat
LONDON -- Crude oil prices shot to new highs Wednesday as markets reacted to a threat by Russian authorities to shut down most of the production from that country's largest oil company.
September contracts of U.S. light crude spiked 3 percent higher to $43.05 a barrel on the New York Mercantile Exchange -- the highest level since the exchange began offering the light, sweet crude contract in 1983. Prices eased slightly later in the day to $42.90, up $1.06 from Tuesday's close.
In London, 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, battered by a gigantic overdue back taxes 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. Yukos officials repeatedly have warned that the company, which produces 2 percent of the world's oil, is being driven toward bankruptcy.
"The Yukos thing could dramatically affect global oil supplies," said Adam Sieminski, an oil price strategist at Deutsche Bank in London.
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 their depleted inventories.
Yukos pumps an estimated 1.8 million barrels a day and exports about half of its output.
"The Saudis just spent the last three months putting an additional 1 million barrels on the market, and the action in Russia threatens to take 1 million off," Sieminski said. "Do we think this is really going to happen in Russia? No. But does anybody know for sure?"
Russian media reports cited a letter sent by Yukos lawyers to Justice Minister Yuri Chaika regarding a bailiffs' order telling three Yukos production subsidiaries to cease all sales of company property.
Yukos spokesman Alexander Shadrin said the letter asked the Justice Ministry and bailiffs to explain the order. If they confirm that Yukos can no longer put its crude into pipelines for shipment, "then in two to three days we will have to stop oil extraction," Shadrin told Associated Press Television News.
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. These stockpiles contain about 1.4 billion barrels, half of them in the U.S. Strategic Petroleum Reserve.
Rothman said he foresees U.S. crude reaching as much as $43.50 a barrel within the next 30 days, but added that such prices aren't sustainable "given the obvious political discomfort among both exporters and consumers."
Other analysts weren't so sure.
"Yukos is just a psychological event," said Peter Gignoux, a London-based oil adviser for GDP Associates in New York. "There's a doomsday machine out there that could easily drive prices higher."
Gignoux noted that many futures traders and speculators had bet that oil prices wouldn't rise above around $42.50 a barrel. Now that prices have surged beyond their earlier expectations, these traders are exposed to widening losses on these positions unless they buy new contracts to limit the damage. Prices could spike as a result, he said.
"Yukos is a short-term issue. If it weren't Yukos, it would be something else. I don't think (Russian President Vladimir) Putin has a death wish," Gignoux said.
"Yukos is not going to be off the market for an extended period of time."