Oct. 12 (Bloomberg) -- Crude oil rose to a record $84.05 a barrel in New York on concern Turkey may seek to quell Kurdish rebels by invading northern Iraq, a country with the world's third-largest oil reserves.

Turkish Prime Minister Tayyip Erdogan told reporters his country would pursue the Kurdistan Workers Party, regardless of diplomatic costs, according to an Agence France-Presse report. Northern Iraq holds some of the country's largest oil fields, including Kirkuk, the source of much of Iraq's exports.

``That's been the trigger, though physically, realistically, I think it doesn't have any possibility of affecting crude supply,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``It's a good headline.''

Crude oil for November delivery rose 61 cents, or 0.7 percent, to close at $83.69 a barrel at 2:50 p.m. on the New York Mercantile Exchange, a record settlement. Earlier, the contract touched $84.05, the highest since futures began trading in 1983.

Nymex futures were up $2.47, or 3 percent, this week. They are up 37 percent this year.

Today's intraday high was less than a dollar from the all- time inflation-adjusted high reached in 1981 when prices jumped because Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.

Commodity traders wield a greater influence on oil prices than Saudi Arabia and the world's other big suppliers, U.S. Energy Secretary Samuel Bodman said today.

``The suppliers, to some degree, have lost control of the pricing,'' Bodman told reporters in Washington.

Traders, Pricing Control

Markets can move more on emotions than the fundamentals of supply and demand as traders take greater control of prices, Bodman said.

``It's all about money flow,'' IAF's Cooper said. ``There is money and lots of it chasing commodities and thus prices are moving higher.''

Brent crude oil for November settlement rose 40 cents, or 0.5 percent, to close at a record $80.55 a barrel on the London- based ICE Futures Europe exchange. Brent was up $1.65, or 2.1 percent, this week.

Turkey's government will present a bill to parliament by next week authorizing a possible incursion across the border within a year, Erdogan said Oct. 10. Turkey said this week it would launch a crackdown on the Kurdistan Workers Party, or PKK, after rebels killed 15 soldiers in southeastern Turkey. That's the region of a two-decade war with the autonomy-seeking PKK in which about 40,000 people, mainly Kurds, have died.

Saudi Arabia has the world's largest reserves of crude, followed by Iran and Iraq. Iraq produced 2.075 million barrels of crude oil a day in September, according to Bloomberg estimates.

Effect on Supply

``At the end of the day, even if Turkey does cross the border, it's not going to mean anything to the supply of oil,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut.

U.S. crude oil inventories fell 1.67 million barrels to 320.1 million barrels in the week ended Oct. 5, the first decline in three weeks, a U.S. Energy Department report showed yesterday.

In Cushing, Oklahoma, the main U.S. supply depot, inventories rose 1.1 percent to 18.6 million barrels, the second straight weekly increase, the report showed. Supplies fell to their lowest since December 2005 in the week ended Sept. 21.

``Yesterday was a pretty dramatic day'' on the Nymex, Armstrong said. Some people think ``the move was unjustified given that crude inventories at Cushing rose. It is reasonable to expect a little bit of a pullback.''

Oil May Fall

Crude oil may decline next week on speculation that higher output by members of the Organization of Petroleum Exporting Countries and falling demand will bolster stockpiles.

Twenty-one of 35 analysts surveyed, or 60 percent, said oil prices will fall through Oct. 19. Eight, or 23 percent, said prices will rise and six said there will be little change. Last week, a record 75 percent of respondents said oil would fall.

OPEC's daily shipments of crude oil will rise 2.8 percent in the four weeks to Oct. 27 from the previous month, consulting company Oil Movements said. The group will load 24.49 million barrels a day, up from 23.82 million.

``As OPEC is rewarded with oil in the low-to-mid $80s, they have all the incentive to pump it and get it shipped out,'' said James Cordier, president of Liberty Trading Group in Tampa.

A two-day oil workers strike in Nigeria was called off yesterday without affecting exports from Africa's largest oil producer.

To contact the reporters on this story: Robert Tuttle in New York at rtuttle@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: October 12, 2007 16:02 EDT