Crude oil prices gained on Wednesday as traders fretted over threats to supply if sanctions were to be made against Iran, Opec’s second-largest producer, over its nuclear ambitions. Disruptions in Nigerian oil supplies amid rising civil unrest also fuelled gains.
Light, sweet crude on the New York Mercantile Exchange for February delivery rose as much as 60 cents to $66,91 a barrel before receding to $66,78 a barrel, up 47 cents.
The Nymex contract on Tuesday leaped $2,39 to settle at $66,31 a barrel, a three-and-a-half month high.
Analysts say oil prices could rise above $70 a barrel if the nuclear dispute between the West and Iran does not reach a quick resolution.
Pressure on Iran intensified on Tuesday with key European countries and the United States moving ahead with plans to refer the dispute over Tehran’s nuclear enrichment to the United Nations Security Council, according to a draft text by Britain proposing referral when the International Atomic Energy Agency’s holds a board meeting on Febuary 2.
Although the draft text stopped short of calling for punitive measures such as sanctions, some analysts said they were concerned Iran would be defiant if referred to the council, leading to heightened tensions.
”Upon referral, Iran would likely curb IAEA inspections of its nuclear sites and may fully resume uranium enrichment,” New York-based consultancy Eurasia Group wrote, adding the move ”will increase tensions and further rattle oil markets”.
”Iranian oil exports are in jeopardy,” said Phil Flynn, analyst at Alaron Trading in Chicago, in a research note. ”This is the most serious threat to the world’s oil production since the hurricanes this past summer.”
The West fears Iran intends to build an atomic bomb, but Iran claims its programme is intended only to produce electricity. Iran decided last week to restart its nuclear programme after a two-a-and-half-year suspension.
Iran holds more than 10% of the world’s oil reserves.
Experts estimate that only about half of Iran’s output of four million barrels a day could be replaced by other producers if a disruption occurs, as global oil supplies are tight.
”What this means for the oil market is that, at the very least, volatility will remain extraordinarily high,” said John Kilduff of brokerage Fimat USA.
Disruptions to supply due to violence in Nigeria — Africa’s leading oil exporter and fifth-biggest crude oil supplier to the United States — were also supporting crude prices, analysts said.
Negotiators were working on 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.
Royal Dutch Shell said on Tuesday it was forced to slash output there by another 115 000 barrels per day, bringing total production cuts to 221 000 barrels per day. – Sapa-AP