Oil price spikes close to 97 dollars after Bhutto death

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(AFP)

LONDON (AFP) - World oil prices surged Thursday towards 97 dollars per barrel on geopolitical jitters following the assassination of Pakistani opposition leader Benazir Bhutto, analysts said.

News of Bhutto's death sent New York's main contract, light sweet crude for February, to a one-month peak of 96.70 dollars per barrel. The contract later stood at 96.36 dollars, up 39 cents from Wednesday's close.

In London, Brent North Sea crude for February delivery reversed earlier losses to stand at 94.28 dollars per barrel, which marked a gain of 34 cents.

Benazir Bhutto was killed in a suicide attack on Thursday, just two months after the former premier returned from exile for a political comeback.

The news "is helping prices ahead of the data," said AG Edwards analyst Eric Wittenauer.

Bhutto's death "highlights the geopolitical tensions, because it's not a major oil exporting region, but it is important in terms of geopolitical impact," Wittenauer said.

There are "rising geopolitical tensions in Pakistan ... and that is supportive for the crude market," he added.

Gold prices, meanwhile, surged to a one-month high of 830.41 dollars per ounce. Gold and crude are widely regarded as a safe investments in times of geopolitical uncertainty.

Oil prices found further support from market expectations of falling crude inventories in the United States.

The US Department of Energy (DoE) was due to publish its report at 1530 GMT on Thursday, one day later than normal due to the Christmas holiday on Tuesday.

American crude reserves are forecast to have fallen by 1.75 million barrels in the week ending December 21 -- which would mark the sixth successive weekly decline.

Last week's DoE update revealed that US crude oil stocks had fallen below their five-year average for the first time in more than three years, heightening supply concerns.

Prices had surged Wednesday as speculators' nerves were rattled by Turkish air raids against Kurdish rebel hideouts in northern Iraq, which stoked supply concerns in the crude-rich Middle East region.

"Yesterday (Wednesday), oil futures surged higher in thin trade amid renewed concerns geopolitical concerns as Turkey yet again bombed Kurdish rebels in northern Iraq," said Sucden analyst Andrey Kryuchenkov.

"Further attacks are expected and should serve as a reminder of the ongoing instabilities in the key oil producing area of the Middle East."

Turkey praised the United States on Wednesday for providing intelligence in support of attacks against Kurdish rebels in northern Iraq, as it confirmed its third such air strike in 10 days.

The air strike was the third against Kurdistan Workers' Party (PKK) targets in northern Iraq that the military has confirmed since December 16.

Last November, oil prices hit a record high 99.29 dolllars as traders reacted to tight global energy supplies amid sizzling tensions between Turkey and Iraq.