http://www.nytimes.com/2000/10/13/business/13OIL.html

           The price of crude oil surged yesterday,
           as news of escalating violence on the
          West Bank and an apparent terrorist attack on
          a United States naval ship in Yemen stoked
          fears of a wider Middle East conflict that
          could disrupt the flow of oil from the region.

          Experts on Middle East oil producers
          cautioned against market panic, however,
          saying that Saudi Arabia and other members
          of the Organization of Petroleum Exporting
          Countries would face enormous diplomatic
          and economic repercussions if they chose to
          limit oil exports as a show of support for the
          Palestinians.

          But the bloodshed in the Middle East has
          startled a United States market already jittery
          because of lagging stocks of heating oil and
          crude oil. The benchmark contract, for
          November crude, closed at $36.06 a barrel
          on the New York Mercantile Exchange
          yesterday, an increase of $2.81, or more than
          8 percent, from Wednesday. Crude prices
          had jumped earlier in the day to $37 a barrel, somewhat shy of a 10-year
          high, after Israeli helicopters fired missiles at Palestinian sites in the West
          Bank and Gaza, in reprisal for the deaths of two Israeli soldiers by a
          Palestinian mob.

          "There's three to four dollars' worth of worry priced into the market right
          now," said John Kilduff, senior vice president for risk management at
          Fimat, the commodities trading unit of Société Générale. "The supply
          situation is so tight that any disturbance drives it up."

          The price of crude oil appeared to be slipping to less than $30 a barrel
          just a week ago but edged up again after a cold snap in the Northeast a
          few days ago. At the same time, weekly statistics showed heating oil
          inventories at half of last year's levels, a shortfall that has stirred concern
          that any disruption in the supply of crude oil could lead to price spikes or
          even shortages this winter.

          Concern over a supply disruption from the Middle East has been building
          all week, set off by a comment Monday from the Saudi crown prince,
          Abdullah, that Israel's prime minister, Ehud Barak, "has to think before
          taking any step and nobody should think that the kingdom of Saudi
          Arabia and the whole Arab and Islamic nation would just watch with
          their hands tied."

          About a third of United States imports, or about 2.53 million barrels a
          day, are from the Middle East. The country consumes about 19 million
          barrels of oil daily.

          Fears that the conflict in the Middle East would overflow Israel's borders
          grew when word spread yesterday of an explosion on a United States
          Navy destroyer at a port in Yemen. The Defense Department also
          reported movements by elite military units outside Baghdad, and
          President Clinton put troops in the Persian Gulf on higher alert.

          Adding to the anxiety about crude oil supplies, three small companies that
          won a third of the 30 million barrels of oil from the country's Strategic
          Petroleum Reserve appeared to be having trouble arranging the financing
          needed to receive the oil. The White House tapped the petroleum
          reserve to try to ease supplies and prices of heating oil, a move that
          seemed to be having some impact until the violence began in the Middle
          East.

          One of the companies, Euell Energy of Aurora, Colo., failed to get a
          necessary letter of credit to receive the three million barrels of oil it won
          in a tender a week ago, thereby forfeiting the oil, which will be offered for
          auction again next Monday, the Energy Department said. Two other
          companies, Burhany Energy Enterprises of Tallahassee, Fla., and
          Lance Stroud Enterprises of New York, received extensions until
          midnight tonight to come up with the letters of credit.

          Despite all the news that has put oil traders on edge, industry analysts
          warn that matters in the Middle East would have to become far worse
          before the notion of a 1970's-type embargo should be taken seriously.
          Saudi Arabia's bellicose talk, they say, is mainly for domestic
          consumption. The kingdom, which is OPEC's de facto leader, sees the
          United States as its closest ally and certainly its largest client for crude oil.

          "It would be very bad for relations with the United States, what with the
          elections coming up and heating oil stocks so low," said Leonidas
          Drollas, chief economist for the Centre for Global Energy Studies in
          London. "It's so dangerous a game."

          But most analysts concede that while the OPEC countries do not really
          want to cut off exports because of the conflict in Israel, they might be
          pushed to drastic measures if the people in their own countries took to
          the streets over the issue. The hope is that over the weekend, diplomatic
          efforts will cool the tensions and the violence will subside somewhat. One
          New York trader said, "The oil markets now are in the hands of the
          politicians."