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NEW YORK -- Increasing Middle East tensions, hurricanes and the shutdown of BP's Prudhoe Bay oil field has resulted in crude oil prices topping $77.50 a barrel, reported the Agence France Presse.
News of the shutdown came to the London market yesterday, as prices were continually rising due to increased geopolitical tensions in the Middle East.
BP announced the closure on Sunday after discovering a small spill in a pipeline that will cut 400,000 barrels per day from the crude oil supply, reported the newspaper. The U.S. Department of Energy estimates that Prudhoe Bay provides for half of the state's total output and approximately 8 percent of the total U.S. production.
Commenting on the spill, Bruce Evers, analyst for Investec told the newspaper "400,000 barrels per day in a fairly tight market is quite a lot of crude to come off the market." He added, "It could be days, it could be weeks or months [before the field operates again]. It entirely depends on how quickly they can sort the problem out."
"It makes an already tight world market even tighter," Tancred Lidderdale, analyst for the Energy Information Administration, told Reuters. "Unexpected bad news will definitely have an impact on prices."
The price of Brent North Sea crude oil for delivery in September rose to $77.73 in electronic trading Friday, the highest level since July 17, when the Israel and Hezbollah conflict erupted. On Monday, the prices had settled to $77.52, a $1.39 increase from the closing price Friday, the report stated.
In New York, prices soared $1.80 to $76.56 per barrel of crude oil in electronic trading before the market opening Monday. The record for crude oil price remains at $78.40, which was set on July 14.
The Middle East is not helping crude prices either. "Tensions over the weekend in the Middle East remain high after Iran again vowed on Sunday to continue to expand their nuclear enrichment work and threatened that they could use oil as a weapon if backed into a corner by the West with UN sanctions," Sucden analyst Michael Davis told the Agence France Presse.
Meanwhile, the violence between Lebanon and Hezbollah escalate further since the fighting started four weeks ago. Israel planes dropped more bombs on Monday, killing 14 civilians, reported the paper.
In addition, the imposing hurricane season continues to threaten oil and gas rigs based in the Gulf Coast of Mexico.