Oil prices recoiled to mid 87 dollar levels in Asia from record highs amid expectations that todays' fuel report will show a rise US crude and gasoline inventories. Light, sweet crude for November delivery dropped 10 cents to $87.51 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.
Oil prices peaked above US$88 a barrel overnight on Tuesday. Higher prices were also egged on by worries that a possible Turkish invasion of Iraq in search of Kurdish rebels. This could threaten the pipeline that runs from Kirkuk, in Iraq, to the Turkish export terminal of Ceyhan. While exports of crude from Kirkuk to Ceyhan have been sporadic since the U.S.-led invasion of Iraq in 2003, oil has been flowing the past two months and in recent days was being shipped at a rate of nearly 500,000 bpd. Oil price hike has also been supported by recent reports from the U.S. Energy Department, the International Energy Agency and the Organization of Petroleum Exporting Countries suggesting oil supplies are flat or falling as demand is growing.
Interestingly, oil prices are still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a US$38 barrel of oil in 1980 would be worth US$96-101 or more today.