Oil breaches $93 barrier

Crude oil climbed above $93 a barrel for the first time, extending this month's gain to 16 per cent, after Mexico shut a fifth of its production and the dollar fell to a record low.

State-owned Petroleos Mexicanos, the third-largest supplier of crude to the US, halted about 600,000 barrels a day of output as a storm barreled through the Gulf of Mexico, spokesman Carlos Ramirez said in Mexico City.

The dollar dropped to $1.4426 per euro, the weakest since the introduction of the 13-nation common currency in 1999.

Crude oil for December delivery rose $1.34, or 1.5 per cent, to an all-time high of $93.20 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $92.71 at 9:38 am London time.

"You can't rule out a scenario of $100 a barrel," said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. "Mexico shutting a fifth of production is fitting into a bullish scenario with people fearing stocks can't be brought up to necessary levels."

Crude has risen 52 per cent this year, driven by concerns that demand for heating fuel during the winter will draw down US oil inventories. Tensions between Turkey and Iraq over Kurdish militants as well as over Iran's nuclear program have also helped drive oil prices higher.

Mexico produces 3.1 million barrels of crude oil a day and about 80 per cent of the output is from the Gulf of Mexico, according to Petroleos Mexicanos, known as Pemex.

The company shut output of 200,000 barrels at noon New York time yesterday and was planning to idle wells that produce a further 400,000 barrels by midnight in Mexico, company spokesman Ramirez said. The wells would be closed until at least October 30, Ramirez said, without elaborating.

The closure happened in the Bay of Campeche, the same area where 21 workers died after another storm last week caused an oil rig to hit a platform.

Brent crude oil for December settlement rose $1.31, or 1.5 per cent, to a record $90 a barrel on the London-based ICE Futures Europe exchange. It traded at $89.50 at 9:39 am London time.

The decline in the dollar is helping boost crude oil prices, said Rowan Menzies, an analyst at Commodity Warrants Australia, Sydney.

The dollar fell to its lowest against the euro on speculation the Federal Reserve will cut interest rates this week as a US housing slump threatens economic growth.

Oil prices have passed the previous all-time inflation-adjusted record reached in 1981, when Iran cut exports. The cost of oil used by US refiners averaged $37.48 a barrel in March 1981, the Energy Department said, or $84.73 in today's money. West Texas Intermediate crude adjusted for inflation touched a record $44.52 a barrel on October 25, and was $44.06 on October 26.

Turkish Prime Minister Recep Tayyip Erdogan warned on October 27 that his country may order wider military attacks against the group's camps if needed, according to Turkish media. Turkey said it bombed PKK units in northern Iraq last week and sent troops across the border in pursuit of the militants.

On October 26, the US accused Iran's military of supporting terrorism and announced new sanctions on the country. The US wants Iran to halt uranium enrichment that it suspects is a cover for developing nuclear weapons.