Oil prices surged by almost $1 a barrel Friday amid speculation that the Soviet Union`s decision to shut down 16 nuclear power plants could force the world`s largest oil producer to remove some oil exports from the bloated market.
Analysts said an Iranian attack on a Saudi Arabian oil tanker in the Persian Gulf and strong U.S. gasoline demand also bolstered oil prices.
On the New York Mercantile Exchange, West Texas intermediate, the key U.S. crude for immediate delivery, jumped 92 cents to $14.73 a barrel. It was the highest close since the crude settled at $15.11 a barrel Feb. 24.
Traders said West Texas intermediate broke through a major resistance level at $14 a barrel.
Unleaded gasoline for June delivery climbed 1.24 cents to 51.64 cents a gallon and home heating oil by 2.49 cents to 43.05 cents a gallon on the Merc. On the European spot market, where oil is sold to the highest bidder, Britain`s benchmark North Sea Brent crude leaped 90 cents to $13.55 a barrel. The Soviet Union closed its graphic reactors after the Chernobyl nuclear accident in a move industry experts estimate has knocked out about 15,000 megawatts, or the equivalent of roughly 400,000 barrels of oil a day.
Observers said the Soviets, who have been selling about 1.2 million barrels a day to the West to capture hard currency, may have to reduce their oil exports to offset domestic power shortages created by the reactor shutdowns.
The Soviet Union is a prime target of an Organization of Petroleum Exporting Countries campaign to flood the glutted market in a high-stakes gamble to compel outside producers to prop up prices by curbing exports. Supply exceeds demand by an estimated 2.5 million barrels a day.
”The Soviet plant closings are a force in today`s market and have had a psychological impact,” said Sanford Margoshes, analyst at Shearson Lehman Brothers Inc. in New York.
”But one has to be careful about exaggerating their importance since the plants were shut down as a safety measure and are not necessarily going to be closed permanently.”
In New York, a spokesman for the Atomic Industrial Forum trade association estimated that the reactor shutdowns removed about 5 to 6 percent of the Soviet Union`s electrical power generation. In 1985, nuclear plants provided 11 percent of Russia`s electricity.
The Soviet Union has begun to substitute natural gas and nuclear power for oil, which then can be sold abroad for desperately needed hard currency.
Analysts said the attack by a suspected Iranian jet fighter on a Saudi tanker in the Persian Gulf also strengthened oil prices because of renewed fears that the Iraq-Iran war could hamper shipping in the vital oil route. Saudi Arabia is an ally of Iraq.
Expectations that U.S. gasoline demand will rise by as much as 400,000 barrels a day this year continued to support prices, they said.
Oil prices have tumbled from an average $28 a barrel in December, when OPEC abandoned production and price controls to regain its ”fair share” of the world market from outside producers.
The Atomic Industrial Forum contends that nuclear power, which has displaced 6 million barrels of OPEC oil a day, is a major factor in the oil price collapse.
