Oil Surges to Highest in Almost 8 Months on Saudi Terror Plot

April 27 (Bloomberg) -- Crude oil surged to the highest in almost eight months in New York and gasoline jumped after Saudi Arabian authorities said they had arrested more than 170 people suspected of plotting to attack the country's oil fields.
The suspects included Saudis and non-Saudis who planned to use aircraft in assaults on the country's oil fields and military, Interior Ministry spokesman General Mansur al-Turki said in a interview aired on Dubai-based Al-Arabiya television. The desert kingdom is the Organization of Petroleum Exporting Countries' biggest producer and the world's top oil exporter.
``The reaction to the Saudi Arabian headlines was very muted at first but once it became clear how big a bullet we dodged, the market took off,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``There's no telling how high prices would have gone if this plot had succeeded. It's impossible to know what else is planned.''
Crude oil for June delivery surged $1.40, or 2.2 percent, to settle at $66.46 a barrel at 2:52 p.m. on the New York Mercantile Exchange. It was the highest close since Sept. 7. The June contract rose 3.7 percent this week. Oil is down 6.4 percent from a year ago. The futures contracts for July through December are higher than the front-month contract.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gasoline for May delivery in New York jumped 7.1 cents, or 3.1 percent, to $2.3613 a gallon, the highest close since Aug. 3.
``This shows that the Saudis have a persistent problem,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``It appears that they thwarted an attack but the bad news is they will have to remain vigilant for a long time.''
Abqaiq Attack
Since May 2003, at least 100 civilians have been killed in terrorist attacks in Saudi Arabia. On Feb. 24 last year, Saudi Arabian forces foiled a suicide attack at the Abqaiq oil- processing center, which handles two-thirds of the supply from the country.
``There were 172 involved in the activities discovered by the police,'' General al-Turki said in a telephone interview from Riyadh. ``They are suspected terrorists. Some of these cells have been planning to target oil refineries and oil installations.'' The detainees belonged to seven separate cell networks, he said.
One of the cells and some of its members were learning to fly airplanes for terrorist attacks, al Turki said. Saudis were among the suicide hijackers who flew airliners in the Sept. 11, 2001, attacks in the U.S.
Prices surged to a record $78.40 a barrel in New York on July 14 on speculation the conflict between Israel and Hezbollah would spread in the Middle East, source of almost a third of the world's oil.
Disruption Concern
Crude oil prices are also higher because of concern that shipments from Iran, Nigeria and Iraq may be disrupted. Attacks in Nigeria and Iraq have cut exports. A dispute over Iran's nuclear program has raised the prospect of a decline in shipments from the country, the fourth-biggest oil exporter.
Nigerian Energy Minister Edmund Daukoru said today he doesn't know exactly when oil production in the country's western Niger River delta, halted for more than a year, will resume. Nigeria is seeking to restore production of about 477,000 barrels a day in output that was shut down last year because of militant attacks in the Niger River delta.
Brent crude oil for June settlement increased 76 cents, or 1.1 percent, to close at $68.41 a barrel on the London-based ICE Futures exchange.
West Texas Discount
West Texas Intermediate crude oil, or WTI, has traded at a record discount this month against Brent, produced in the North Sea, because of rising inventories at Cushing, Oklahoma. The spread between Brent and WTI was the narrowest today since March 29.
Stockpiles at Cushing, the delivery point for Nymex futures, slipped 4.2 percent to 26.8 million barrels in the week ended April 20, the Energy Department reported on April 25. Inventories rose to 28 million the prior week, the highest since at least April 2004, when the department began reporting on supplies there.
The closure of Valero Energy Corp.'s McKee refinery near Sunray, Texas, after a fire in February left excess crude oil at Cushing. The plant is processing 85,000 barrels of oil a day and will reach 150,000 by the end of June, the company said. The refinery will return to its normal capacity of 170,000 barrels of oil a day by the end of this year.
Crude oil may rise next week, according to a Bloomberg News survey. Fourteen of 33 analysts surveyed, or 42 percent, said oil prices will rise. Eleven, or 33 percent, said prices will decline and eight forecast that oil will be little changed.