Oil hits record above $72 on Iran fears
By Janet McBride
LONDON (Reuters) – Oil hit a record $72.64 a barrel on
Tuesday as Iran defied world pressure to halt its nuclear
program, raising new fears of a cut in supplies from the
world’s fourth-biggest crude exporter.
In London, North Sea Brent crude oil jumped $1.18 to set
its all-time high as Iran and the West exchanged increasingly
sharp words over the Islamic Republic’s determination to push
ahead with uranium enrichment.
U.S. crude oil climbed to $71.60, smashing through its
previous record of $70.85.
“This is a bull market and we have not found a top yet,”
said Tom Bentz, a senior analyst at BNP Paribas Commodity
Futures in New York.
Prices fell back slightly in later trade, with Brent, an
indicator of the cost of Europe’s oil imports, settling up
$1.05 to $72.51, while U.S. crude settled up 95 cents at
$71.35. High U.S. oil stocks have helped to push U.S. crude
“The current shoot up we are experiencing is as a result of
the Iran problems and it’s not helped by the flare up between
Israel and the Palestinians,” OPEC President Edmund Daukoru
said on Tuesday.
“But mainly it’s the threatening statements being made
against Iran as a result of its nuclear program,” added
Daukoru, who is also Nigeria’s oil minister.
Nigerian output is also a major concern.
Oil prices have soared from $20 at the start of 2002 and
are nearing the inflation-adjusted peaks of over $80 hit in
1980, the year after the Iranian revolution.
Initially fired by strong demand from the United States and
the fast-growing economies of China and India, the rise has
accelerated over the past year on worries over supplies.
Iraq’s once significant oil industry is in crisis, Nigerian
exports have been slashed by rebel attacks on the world’s
eighth-biggest exporter and consumers are worried that Iran’s
exports could fall victim to its nuclear dispute with the West.
The rally has also been aided by big investment funds
putting their money into commodities in the hope of higher
returns than they get from equities or bonds.
President Mahmoud Ahmadinejad declared Iran a nuclear power
last week, saying it had enriched uranium to the level used in
power stations. Tuesday, he delivered a warning to any nation
considering attacking his country.
“Today, Iran’s army is one of the most powerful armies in
the world and it will powerfully defend the country’s political
borders and the nation,” Ahmadinejad said in a speech during an
armed forces parade.
“It will cut off the hands of any aggressors and will make
any aggressor regret it,” he added.
The United States has said it wants a diplomatic solution
to the standoff but has not ruled out a military option.
It is expected to push for targeted sanctions against Iran
when it meets the U.N. Security Council’s other permanent
members — Britain, France, China and Russia — plus Germany.
The disruption to Nigeria’s crude output will become more
critical as the U.S. driving season begins next month.
Nigeria is a major supplier of gasoline-rich crude oil to
the United States. Analysts reckon gasoline stocks in the
world’s top oil user fell again last week.
“Under the wrong circumstances, you could easily see $80
being broken or even higher than that,” said Kevin Norrish, an
analyst at Barclays Capital. “Any major loss of production is
going to give us another major push up.”
Ministers from the Organization of the Petroleum Exporting
Countries, who will gather informally this weekend during an
International Energy Forum meeting in Doha, have said there is
nothing more the group can do to bring down prices.
For over a year OPEC has been pumping close to its limit.
“It is obvious that OPEC does not have a magic wand …
OPEC is doing all it can regarding oil production,” Qatari Oil
Minister Abdullah al-Attiyah told Qatar’s state news agency
Algerian Energy and Mining Minister Chakib Khelil said
prices could stay high until the end of the year.
(Additional reporting by Alex Lawler in London and Richard
Valdmanis in New York)