Oct. 16 (Bloomberg) -- Crude oil rose to a record near $88 a barrel on concern Turkey may attack Kurdish militants in Iraq and disrupt oil shipments.

Turkish Prime Minister Recep Tayyip Erdogan said he expects the country's parliament will tomorrow approve a possible military incursion into Iraq, holder of the world's third-largest reserves. Iraq today announced plans to sell 6 million barrels of Kirkuk crude that's shipped through a pipeline from its northern province.

``It's a strong geopolitical concern,'' said Olivier Jakob, managing director at Petromatrix GmbH in Switzerland. ``The market is pricing in some disruption,'' putting $90 a barrel ``within easy reach.''

Crude oil for November delivery rose as much as $1.84, or 2.1 percent, to $87.97 a barrel in electronic trading on the New York Mercantile Exchange, the highest since the futures were introduced in 1983. The contract traded at $87.43 at 12:38 p.m. in London.

Political unrest in countries like Iraq, rather than any supply restriction, is keeping prices high, Libya's top oil official Shokri Ghanem said yesterday. Iraq's exports fell 100,000 barrels a day last month to 1.68 million barrels a day, after a Sept. 18 assault on a link from Kirkuk fields. The country's oil- rich northern region is controlled by a semi-autonomous Kurdish administration.

Oil pipelines run through southern Turkey where many attacks by the Kurdistan Workers' Party, or PKK, have occurred.

Brent crude oil for November settlement climbed as much as $1.56 cents, or 1.9 percent, to a record $84.31 a barrel on the London-based ICE Futures Europe exchange. It traded at $83.83 at 12:33 p.m. local time.

Room to Cover

``Saudi Arabia has room to cover Iraqi supplies but that would use up all their spare capacity,'' said Helen Henton, head of commodity research at London-based Standard Chartered Plc. ``Supplies are quite tight, we're not flooded with extra oil.''

The U.S. Energy Department will probably say tomorrow that inventories of distillate fuels, which include heating oil and diesel, fell for a third week, according to a Bloomberg News survey. Stockpiles of heating fuel were 21.7 percent below the seasonal average, the Department said on Oct. 11.

Besides the threat to Iraqi supply, ``there's a risk of sporadic attacks on the Baku-Tblisi-Ceyhan pipeline if there's a conflict,'' said Petromatrix's Jakob. BP Plc's link has the capacity to transfer one million barrels of oil a day from the Caspian Sea for shipment from Turkey's southern port of Ceyhan.

Crude-oil stockpiles rose 1.5 million barrels in the week ended Oct. 12 from 320.1 million barrels, according to the median of responses by 11 analysts before this week's Energy Department report.

Restraint

Turkey must ``show restraint'' and avoid any military action against the PKK, said White House spokesman Gordon Johndroe in a statement yesterday.

Oil has gained more than $3 this week on speculation of a Turkish offensive and as declines in the value of the U.S. dollar enhance the appeal of commodities as a hedging tool against inflation.

In dollars, West Texas Intermediate, the New York-traded crude-oil benchmark, is up 46 percent so far this year. In euros, oil is up 29 percent, while its gain in British pounds and Japanese yen is 34 percent and 43 percent, respectively.

OPEC members have said a falling dollar justifies higher prices because oil-producing countries sell oil in dollars and often buy goods in euros. OPEC will discuss the impact of the falling dollar when members meet on Dec. 5, Algerian Oil Minister Chakib Khelil said yesterday.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net