NEW YORK — Oil prices moved higher Monday as traders worried that the latest developments in the Persian Gulf could escalate into a confrontation hampering the flow of supplies from the region.
At the same time, analysts said the underlying fundamentals remained bearish for prices, as members of the Organization of Petroleum Exporting Countries continue producing more oil than world markets need.
On the New York Mercantile Exchange, contracts for October delivery of West Texas Intermediate, the benchmark U.S. crude, closed at $19.73, up 34 cents from Friday.
'It seems a lot of the hype we're seeing--the new raids, the flashing sabers--is overshadowing the overproduction scene," said Richard Kane, a trader at Merrill Lynch Energy Futures. "But any time the market approaches $20 (a barrel), it backs right down."
Informal Truce Over
Over the weekend, Iraq said it launched a series of attacks on Iranian oil facilities and tankers carrying Iranian oil.
The attacks, which continued Monday, broke an informal monthlong cease-fire that the warring countries had observed regarding attacks on each other's commerce in the waterway.
Also Monday, an Iranian speedboat attacked a Kuwaiti-flagged freighter, according to salvage executives based in the Persian Gulf. Iran accuses Kuwait of aiding the Iraqi war effort.
Oil analysts said trading in New York opened predictably higher, drawing some additional support from short covering.
"Uncertainty makes people feel they don't want to be short," said Peter Beutel, assistant director of the energy group at Elders Futures Inc.
Stephen J. McKiernan, of the McKiernan & Co. commodities trading firm, said traders were more cautious Monday than earlier in the summer, when similar fears about restricted supplies drove prices to a high of $22.39 for the near-month contract.