Crude oil futures soared past $96 a barrel to their highest level in nearly a month Wednesday, led by fears of a supply disruption from Turkish air strikes inside Iraq and a weaker dollar. Light, sweet crude for February delivery was recently up $2.16, or 2.3%, to $96.29 a barrel on the New York Mercantile Exchange after climbing to $96.54, the highest intraday price since Nov. 27. Brent February crude on the ICE futures exchange rose $2.10 to $94.80 a barrel.
Crude futures received a boost early in the session after the Turkish military announced its warplanes hit eight suspected Kurdish rebel hideouts in northern Iraq Wednesday, the third cross-border air assault in 10 days.
Iraq produced 2.32 million barrels of oil a day in November, according to the International Energy Agency, or about 2.7% of the world's oil supply. As much as 400,000 barrels a day is exported north across Iraq's border with Turkey.
"People are nervous about a possible disruption of supply on some important pipelines that go through there," said Mike Fitzpatrick, an analyst at MF Global in New York.
The market is also trading in anticipation of another drawdown in U.S. oil stocks to be reported Thursday in weekly oil inventory statistics from the U.S. Energy Information Administration. Analysts polled by Dow Jones Newswires expect U.S. crude stocks to fall by 1.2 million barrels, making the sixth draw in a row.
Distillate inventories, which include heating oil and diesel fuel, are seen coming down by about 600,000 barrels, according to the analysts' average, while gasoline stockpiles are seen growing by 1.6 million barrels.
Fitzpatrick said port closures along the Mexico's Gulf coast earlier this week has also lent support to prices, as they could temporarily slow U.S. crude imports.
The market was also bolstered by the dollar, which weakened against the euro and yen and thus helped "perpetuate the belief that an ongoing uptrend in crude oil (price) is justified," New York-based Citigroup energy analyst Tim Evans said in a note.
Thin volumes in a holiday week were expected to be even more pronounced Wednesday, as many London-based traders stay home for Boxing Day. That could lead to a volatile session.
"Activity may remain subdued - at least on the volume side of it - through the end of 2007," said Peter Beutel, president of New Canaan, Conn.-based Cameron Hanover, an energy risk management firm. "We do often see these thin conditions as being conducive to unexpected moves, though. If a small, determined group of traders wants to see $100 (a barrel), this could be a good time to push for it."
Front-month January reformulated gasoline blendstock, or RBOB, rose 8.20 cents, or 3.4% to $2.4660 a gallon. January heating oil climbed 7.78 cents, or 3%, to $2.6725 a gallon.