Oil hits $86 on Turkey tensions

Oil traders fear that exports from northern Iraq could be hit

Global oil prices have surged to fresh highs after increased tensions between Turkey and Kurdish rebels in northern Iraq and concerns over production.

In New York, US light, sweet crude soared by $2.44 to settle at a record $86.13 while Brent crude added $2.20 to finish at $82.75.

Analysts said the rises followed reports that Turkish forces had shelled an Iraqi border village overnight.

Separately, Opec said that non-member nations were set to cut production.

About 110,000 fewer barrels of oil would be produced each day by those who weren't part of the cartel, Opec said in a report.

Last month Opec said that it would be boosting its production by 500,000 barrels per day from the beginning of next month to cope with demand.

'Perceived risk'

The Turkish government is now preparing a motion seeking parliamentary approval for a military incursion into northern Iraq after 13 Turkish soldiers were killed close to the Iraqi border.

Oil out of Northern Iraq has been erratic for some time, Linda Rafield Oil analyst

Ankara estimates that 3,500 Kurdistan Workers' Party (KWP) rebels are based across the border in Iraq.

The KWP wants to see the establishment of an independent Kurdish homeland, incorporating territory in eastern Turkey and northern Iraq.

Analysts said that Turkey's decision to ask for permission to pursue Kurdish rebels into Iraq fuelled fears that hostilities would disrupt oil supplies.

"Oil out of the northern (Iraq) fields has been erratic for some time," said Linda Rafield, senior oil analyst at Platts.

"But complete disruption would definitely be bullish for this market."

The US has urged the Turkish government to show restraint.

However, relations between Washington and Ankara are currently strained after a recent US congressional vote branding the mass killing of Armenians in 1915-17 by Ottoman Turks as genocide.