Oct. 15 (Bloomberg) -- Crude oil rose to a record above $85 a barrel as tensions on the Turkey-Iraq border increased concern that supplies may be threatened as global stockpiles decline.

Turkish lawmakers will vote this week on allowing military attacks within a year against Kurdish rebel bases in the north of Iraq, which has the world's third-largest oil reserves. Global fuel inventories fell below a five-year average last month, a period when they typically rise, the International Energy Agency said Oct. 11.

Oil is ``underpinned by mounting tension between Turkey and Iraq,'' said Andrey Kryuchenkov, a London-based analyst at Sucden (U.K.) Ltd. ``Bullish fundamentals in combination with the broad weakness in the dollar are already providing a substantial support for crude prices.''

Crude oil for November delivery climbed as much as $1.50, or 1.8 percent, to $85.19 in electronic trading on the New York Mercantile Exchange. The contract traded at $84.83 at 1:44 p.m. London time.

Brent crude oil for November settlement rose as much as $1.38, or 1.7 percent, to a record $81.93 a barrel on the London-based ICE Futures Europe exchange. It traded at $81.48 a barrel at 1:44 p.m.

Prices rallied last week after 15 Turkish soldiers were killed by Kurdistan Workers' Party rebels. Crude also rose as the IEA said declining product inventories are sustaining high prices and after a U.S. Energy Department report showed the nation's crude stockpiles unexpectedly fell the week before.

``Any tension between Iraq and Turkey and threats of Turkish action in northern Iraq will increase the likelihood'' of exports disruption from this area, said Julian Lee, a senior energy analyst with the Centre for Energy Studies in London.

Fresh Longs

Hedge fund managers and other speculators raised their net- long positions in New York oil futures, the difference between contracts to buy and sell the commodity, according to U.S. Commodity Futures Trading Commission data.

Net-long positions increased 23 percent to a nine-week high of 69,190 contracts in the week ending Oct. 9, the commission said in its latest weekly snapshot report.

``We have seen a bit of fund activity this morning,'' said Kevin Blemkin, a broker at MF Global Ltd. in London.

Citigroup Inc. raised its forecast of the price of Brent and West Texas Intermediate oil by $10 a barrel to $70 a barrel in 2008 and to $65 in 2009.

``The higher near-term oil price reflects the current macro cocktail of tightening inventory balances'' and ``ongoing robust demand indicators,'' James Neale and Mark Bloomfield, London- based analysts at Citigroup, wrote today in a report.

``There is enough crude in the market,'' Shokri Ghanem, the chairman of Libya's National Oil Corp., said today in a telephone interview from Tripoli.

Ghanem said political tensions, wars and unrest in oil- producing nations including Iraq and Iran are supporting prices. Libya is a member of the Organization of Petroleum Exporting Countries.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net; To contact the reporters on this story: Bill Murray in London at wmurray1@bloomberg.net

Last Updated: October 15, 2007 08:48 EDT