Oil prices raced higher Monday as signals grew that al Qaeda was behind the Madrid bombings, raising fears of future attacks that could disrupt energy supplies.
London Brent crude jumped $1.56 to $33.80 a barrel while U.S. light crude prices was $1.25 higher at $37.44 a barrel.
Evidence that al Qaeda may have had a hand in the Madrid bombings last week have added to the spectre of more attacks on countries that have supported the U.S. war on terror.
Police in Pakistan defused a huge car bomb found outside the U.S. consulate in Karachi on Monday just two days before U.S. Secretary of State Colin Powell visits the country.
Even before the Madrid attack, crude had hit the highest level since just before the U.S.-led invasion of Iraq, driven up by strong Chinese demand growth and low inventories in the United States, which guzzles more than 20 million barrels of oil a day.
Monday’s gains more than reversed losses on Friday when the U.S. Senate voted to cancel delivery of about 53 million barrels of crude oil to the nation’s emergency stockpile.
“The bombings and election of the opposition party in Spain, the evidence building the attacks were al Qaeda, and the dispute over whether to keep filling the SPR are all in the mix,” said Mike Fitzpatrick, analyst at Fimat USA. “I think there is a better safe than sorry attitude pushing prices up while the market assesses the news.”
Oil has also been propelled higher in recent weeks by OPEC plans to cut official production by four percent from April 1 to 23.5 million barrels per day.
Adding to the bullish tone, Nigeria said at the weekend OPEC should raise its reference price, used to help determine production cuts or increases, above the current band of $22-$28, adding a voice to that of fellow member Venezuela.
Nigeria wants the issue to be discussed at OPEC’s March 31 meeting, the country’s oil adviser Edmund Daukoru said on the sidelines of a gas conference in Cairo.
The reference price has been above the top end of its range for every day but one in the past four months and last stood at $31.94 a barrel.
However, Nigeria’s hawkish stance was contrasted by more conciliatory comments from the United Arab Emirates’ Oil Minister Obaid al-Nasseri.
He said OPEC could defer its decision to cut production if prices were too high and stockpiles too low.
“If there is a review, it will be to delay applying the decision and not to cancel it,” he said in Abu Dhabi.
Most OPEC ministers have said the cartel that controls half the world’s crude exports would go ahead with the cuts.
