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DateLine Sunday, 30 December 2007

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Oil prices rise on Turkish air raids, supply concerns

New York, (AFP) - Oil prices rose sharply on Wednesday as speculators' nerves were rattled by Turkish air raids against Kurdish rebel hideouts in northern Iraq and lingering supply concerns.

Oil prices spiked after Turkish president Abdullah Gul praised the United States for providing military intelligence as Ankara confirmed its third air strike in 10 days against apparent Kurdish rebel bases.

New York's main oil futures contract, light sweet crude for February delivery, closed up 1.84 dollars at 95.97 dollars a barrel following the US markets break for the Christmas Day holiday on Tuesday.

In London, Brent North Sea crude for February delivery settled up 1.24 dollars at 93.94 dollars a barrel halfway through a holiday-shortened trading week.

US-based traders said confirmation of fresh Turkish air strikes had once again raised geopolitical angst, particularly as Iraq has some of the world's largest oil reserves.

In earlier New York trading, prices had surged as high as 96.54 dollars. Prices struck a record high of 99.29 dollars on November 21.

Turkey's air raids on Wednesday were the third against the Kurdistan Workers' Party (PKK) targets in northern Iraq that the military has confirmed since December 16, in addition to a cross-border ground operation.

"Further Turkish military efforts against the PKK rebels keeps the geopolitical pot boiling in that oil flows from Iraq could potentially be disrupted," said Mike Fitzpatrick, a market trader at Man Financial.

Ankara says an estimated 3,500 PKK militants have taken refuge in northern Iraq, using camps there as a springboard for attacks across the border.

Traders said fresh supply worries had also stoked prices higher.

"Poor weather closed two of Mexico's main export ports in the Gulf on Monday, as well. Although they have reopened, the delays may impact US oil supplies in the weeks ahead. Crude oil stocks are already near three year lows," Fitzpatrick said.

Market participants said they were awaiting a weekly snapshot on US energy stockpiles due to be released Thursday, a day later than normal due to the Christmas holiday.

Last week's update from the US Department of Energy revealed that US crude oil stocks had fallen below their five-year average for the first time in more than three years.

Oil prices had also risen in earlier trading in Asia.

Asian traders said prices had got bid up on expectations of strong heating fuel demand as cold weather continues to buffet the US midwest.

"What you are seeing is reasonably cold weather in the US which means we will see demand for heating oil," said Jason Feer, Asia-Pacific general manager for energy market analysts Argus Media in Singapore.

"The market sort of tends to view the cold weather as a bullish factor," he said.

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