Oil prices leapt past $43 a barrel at one point yesterday on fears that the murky dispute between Russia's government and the country's largest oil company, OAO Yukos, could jeopardize some crude shipments from the world's No. 2 oil-exporting nation.
The prospect that the Kremlin-Yukos brawl might shut down the company's daily production of 1.7 million barrels -- more than OPEC member Libya produces and about 2% of global output -- hit oil markets already made skittish by growing world demand, terrorism fears and a global oil infrastructure already pumping at close to capacity. While it's unclear whether Yukos's output is actually in jeopardy, the reaction underscores the growing importance of Russia -- which exports six million barrels a day, behind only No. 1 Saudi Arabia -- in world energy markets.
Yesterday, September futures for benchmark crude oil touched $43.05 a barrel on the New York Mercantile Exchange in morning trading, the highest point in the 21-year history of trading in crude futures on the exchange. The futures settled at $42.90, up $1.06, the highest Nymex settlement price.
Still, the current oil price is not the "record" as some describe it, since in inflation-adjusted terms, oil prices remain about half of the levels hit in the early 1980s.
In Russia, Yukos's chief executive officer, Stephen Theede, said a recent order from Russian court officers seeking to enforce a tax claim against the company by blocking any asset sales could be interpreted as forcing the oil giant to stop pumping oil. But Mr. Theede said the company continues to pump oil and doesn't plan to stop. "We're just trying to get a clarification," he said on a trip to Yukos's Siberian fields yesterday. To stop production "does not seem logical to me," he said.
Late yesterday, an official with the court -- which is seeking to collect a 99 billion ruble ($3.4 billion) judgment against the company for back taxes -- denied that the orders in the tax case would affect the company's production and criticized the company for overly dramatizing the situation, the Russian news agency Interfax reported.
Nevertheless, markets reacted quickly. Traders also seized on mixed signals from U.S. oil inventories. The U.S. Energy Information Administration yesterday said crude stocks rose in the U.S. by 1.2 million barrels last week, while the American Petroleum Institute, an industry group, reported a decline of 3.1 million barrels in stocks. The two sets of data often differ.
Russia's stature as a supplier has grown as output declines in the most stable corners of the world, such as the North Sea and North America. Meanwhile, in the oil-rich Middle East, major supplier Iraq has seen its output hammered by continuing sabotage, and recent terrorist attacks in Saudi Arabia have raised fears about the security of supplies from the kingdom.
At the same time, spare capacity to pump petroleum is at its lowest level in years, an estimated 1% of total demand. That means geopolitical developments, such as the Yukos news and a recent spate of terrorist attacks in Saudi Arabia, have spurred traders to bid prices sharply higher.
High oil prices, which have led to rising prices for key commodities like gasoline and jet fuel, so far haven't had a significant impact on economic growth. Oil-price increases have become less painful because industrialized nations have become more fuel-efficient and because today's prices don't look so high once adjusted for inflation. In 1980, following the Iranian revolution, oil averaged $79.99 a barrel in today's dollars. Still, consulting firm Global Insight Inc. predicts that world economic growth would be reduced by 0.3% in both 2005 and 2006 if oil stays at a price range of $35 to $40 a barrel.
A key to the new equilibrium has been Russia and its oil giants. Russia has met about half of the 4.5 million barrel-a-day increase in world use over the past three years. Russia's output alone has more than offset China's leap in consumption. Between 2001 and this year, Chinese demand rose 1.6 million barrels a day, according to estimates by the International Energy Agency. In the same time frame, output in the former Soviet Union -- most of it in Russia -- rose 2.5 million barrels a day.
Higher oil prices have been a key driver of Russia's economic growth, adding to the popularity of Russian President Vladimir Putin. A $1 rise in the price of exported oil and related products adds roughly $180 million a month to Russia's economy. But Russia in the past has resisted entreaties by the Organization of Petroleum Exporting Countries to control output and has said it wants oil prices to stay reasonable. Russia also has been hustling to add pipelines, tankers and barges to put more oil into world markets.
Until recently, Yukos was one of the crown jewels of the Russian industry. The company is facing tax claims potentially totaling $6.7 billion. The crackdown is widely seen as a move by Mr. Putin to punish the company's jailed former CEO, Mikhail Khodorkovsky, for attempting to build his own political empire.
Yukos and rivals such as OAO Lukoil have helped Russia re-emerge as an oil powerhouse in recent years. Starting in 1999, higher world oil prices helped drive investment in the sector. Yukos, which overtook Lukoil as Russia's biggest producer this year, has contributed more than a third of Russia's added production since 1999.
Mr. Theede said the company hopes to learn today from court officers whether it can have access to bank accounts through which much of its revenue flows.
In Moscow yesterday, Justice Minister Yuri Chaika, who supervises the court officers enforcing the tax claim, confirmed that authorities are going ahead with plans to sell off Yukos's largest subsidiary to pay off the tax debts. Yukos officials have said that selling that unit could drive the company into bankruptcy court.
Yukos's troubles have made Western investors nervous, but Russia's vast reserves may still prove tempting. BP PLC's second-quarter results were helped by its participation in a Russian joint venture, TNK-BP. ConocoPhillips is in talks with Lukoil about taking an equity stake in the company and participating in a joint venture.
---- Bhushan Bahree and Peter A. McKay in New York contributed to this article.
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