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Oil Prices Near $72 a Barrel

Posted on: Monday, 21 August 2006, 09:00 CDT

By GEORGE JAHN

VIENNA, Austria - Oil prices approached $72 a barrel Monday, rebounding from declines last week, after Iran insisted that it will not suspend uranium enrichment.

Prices also appeared to be underpinned by concerns about supply disruptions in Nigeria due to civil unrest and fear of potential hurricanes that could strike Gulf of Mexico refineries. Traders were also watching for signals of where fuel demand is headed in the wake of BP's production woes at its Prudhoe Bay field in Alaska.

Light, sweet crude for September delivery on the New York Mercantile Exchange rose 81 cents to $71.95 a barrel in electronic trading by afternoon in Europe.

October Brent on London's ICE Futures Exchange gained 86 cents to $73.16 a barrel.

Heating oil futures jumped by more than 3 cents to $2.0234 a gallon and gasoline futures were steady at $1.9676 per gallon. Natural gas futures fell 6 cents to $6.670 per 1,000 cubic feet.

The U.N. Security Council passed a resolution last month calling for Iran to suspend uranium enrichment by Aug. 31 or face the threat of economic and diplomatic sanctions.

Iran has said it will respond by Tuesday to the U.N. incentive offer but insisted on Sunday that it would not suspend uranium enrichment altogether.

Speaking after Iran's military test-fired 10 short-range missiles, Foreign Ministry spokesman Hamid Reza Asefi said a nuclear compromise would have to be reached during future negotiations.

"Everything has to come out of negotiations," Asefi said. "Suspension is not on our agenda."

The U.N. Security Council passed a resolution last month calling for Iran to suspend uranium enrichment by Aug. 31 or face the threat of economic and diplomatic sanctions.

Koichi Murakami, an analyst with brokerage Daiichi Shohin in Tokyo, said "It is very difficult to decide what to do now in this situation."

"Iran is very unlikely to accept (the U.N.'s package), which is supportive for prices. On the other hand, supply concerns (at Prudhoe Bay in Alaska) have eased, which put downward pressure on prices," Murakami said.

Elsewhere in the Middle East, a cease-fire in Israel and Lebanon was in its seventh day, although Israel on Saturday conducted a pre-dawn commando raid deep into Lebanon's eastern Bekaa Valley, prompting U.N. Secretary-General Kofi Annan to declare the Israelis in violation of the Security Council truce resolution.

Oil prices had hit a record high of $78.40 a barrel on July 14, two days after fighting erupted in Lebanon.

They fell back last week as supply fears abated after the cease-fire in Lebanon and BP PLC restored half of the production at the Prudhoe Bay oil field. On Friday, prices dipped below $70 a barrel during day trading for the first time in almost two months before regaining ground and closing at $71.14.

Still, PVM Oil Associates in Vienna said that the Prudhoe outage was "expected to leave its mark on U.S. crude inventories," when they are published Wednesday.

Source: Associated Press/AP Online

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