Oil price rise after the death of King Fahd: just a temporary situation

The death of Saudi Arabia's led to an incredible oil price rise, but price experts say the disruptions in the price or supply of oil are not expected.

Oil prices briefly reached $62.30 a barrel, a record high, before closing at $61.57, up $1 for the day on the New York Mercantile Exchange. The previous intra-day high was $62.10.

Oil prices have climbed more than 40 percent this year, to the surprise of forecasters and the consternation of consumers who are now paying an average of $2.30 for a gallon of gasoline. The price keeps rising, even though inventories have been steadily building and there are no signs of an imminent shortage.

What worries the market, say energy specialists, is the delicate balance between supply and demand. Most countries are producing all the oil they can. For the moment supplies are adequate, but the fear is some sort of disruption -- possibly the result of political instability in one of the oil-producing countries -- could create a shortage that would send prices rocketing higher.

Events that the market might shrug off in other times - everything from refinery fires to hurricanes - lead to price spikes and worries that a crisis could be brewing.

''I don't think there is any reason for immediate concern in the oil markets," Nader Habibi, a Middle East analyst with Global Insight, a Waltham forecasting firm, commented on the situation, according to Boston Globe. Fahd suffered a stroke in 1995. Fahd's half-brother, Crown Prince Abdullah, has run the country for years, said Habibi, and his elevation to king yesterday should have no impact on the nation's energy production.

According to Habibi, Abdullah is considered pro-Western. By Saudi standards he is also a supporter of economic reform and political liberalization. Although he is 81 years old, Abdullah is said to be in good health. Who comes after Abdullah is less clear, said Habibi. A younger generation of potential leaders is waiting in the wings and it is not obvious yet which of them will emerge on top. ''At that point you might have a real competition," Habibi said.

Over the past few years Saudi Arabia has been plagued by a series of terrorist attacks, some of which have been aimed at foreigners working in the oil industry. So far, at least, the attacks have not disrupted oil production or threatened the stability of the government.

Saudi Arabia is the world's leading oil exporter and one of the few countries with the capacity to pump more oil in the event of a shortage.

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