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Oil Prices Surge Past $65 on Iran Fears

Posted on: Tuesday, 17 January 2006, 09:01 CST

By GEORGE JAHN

VIENNA, Austria - Crude oil prices spiked past $65 Tuesday as Iran's nuclear ambitions and an attack on an oil platform in Nigeria kept traders edgy over potential supply snags.

Natural gas and heating oil also rose despite plentiful supplies and warm weather in the United States, the world's largest energy market.

Light, sweet crude for February delivery rose $1.35 to $65.27 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. The market was closed Monday for the Martin Luther King Day holiday.

March Brent crude on the ICE Futures exchange rose 89 cents to $64.07 a barrel.

Heating oil gained about 4.5 cents to $1.7602 a gallon while gasoline advanced about 3.5 cents to $1.7660 a gallon.

Natural gas rose 17 cents to $8.965 per 1,000 cubic feet.

Analysts said energy futures jumped on concerns that the U.N. Security Council will consider sanctions against Iran because of its nuclear program, and after Iran's warning that any sanctions imposed could send oil prices even higher.

"The Iranian nuclear issue is driving the market. Traders are short-covering because they know if something happens in Iran the market would be in confusion," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. "The issue poses a threat of supply disruption in a major oil-producing country."

Russia and China on Monday joined the U.S. and its European allies in demanding that Iran fully abandon its nuclear program. The powers called for an emergency board meeting of the International Atomic Energy Agency on Feb. 2-3 to discuss the issue.

The West fears Iran intends to build an atomic bomb, but Iran claims its program is intended only to produce electricity.

Iran is the Organization of Petroleum Exporting Countries' second-largest producer and sanctions targeting its oil and gas exports could disrupt the world's energy markets.

Analysts also said recent attacks on oil facilities in Nigeria - Africa's leading oil exporter and the fifth-biggest source of U.S. oil imports - were supporting crude's rise.

Negotiators were working Tuesday to free four foreigners held hostage in the nation's southern oil region as militants claiming to hold the captives said they would target oil installations if their demands were not met within days.

Armed fighters attacked a Royal Dutch Shell PLC oil platform at dawn on Sunday, damaging the facility and killing at least one person in the third assault on its facilities in less than a week.

Shell says recent violence has caused its consortium to cut 106,000 barrels in daily crude production. Nigeria produces about 2.5 million barrels a day.

Meanwhile, the International Energy Agency said Tuesday that global energy demand is still expected to grow by 2.2 percent this year. The energy watchdog left its forecast for world oil demand this year unchanged at 85.1 million barrels a day, up more than 1.8 million barrels a day against last year, led by the U.S. and China, the world's top energy consumers.

The group also projected that Chinese oil demand bounced back from weakness late last year, with an expected near-7 percent growth in December.

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Associated Press Writer Gillian Wong in Singapore contributed to this report.

Source: Associated Press/AP Online

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