Oil prices rise as Bush presses Iran

Crude futures rose on Tuesday over Iran concerns after United States President George Bush warned that nations worldwide will not back down from their demand that Tehran suspend uranium enrichment.

Worries over Iran’s nuclear ambitions have clouded the outlook for the nation’s oil exports—and global oil prices, despite expectations that US stock levels will remain healthy.

Light, sweet crude for July delivery was up 42 cents by afternoon in Europe, trading at $69,40 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract fell 90 cents to settle at $68,98 after the Organisation of Petroleum Exporting Countries said high prices were affecting demand, and the prospect of rising interest rates fuelled market concerns about economic growth.

July Brent crude futures on London’s ICE Futures exchange rose 54 cents to $68,65 a barrel.

Traders had taken some relief from conciliatory remarks out of Iran on Saturday that the Western package of incentives meant to persuade the Islamic republic to give up its uranium enrichment programme was “a step forward”.

But the issue remains tense, with Bush saying if Iran rejects the incentives, it will face action before the United Nations Security Council and progressively stronger political and economic sanctions.

“The calming comments from Tehran have taken out part of the risk premium, but the threat of a potential supply disruption from Iran is still present, although not imminent,” said Victor Shum, an energy analyst with Purvin and Gertz.

“In the short term, if we see progress toward a diplomatic resolution in Iran, prices will drop to the low- to mid-$60s,” he said.

Still, concerns over Iran appeared to outweigh expectations that oil and related stock levels will increase or drop only marginally when the US Department of Energy publishes its weekly snapshot of supplies on Wednesday.

Vienna’s PVM Oil Associates said the figures would likely show an increase in gasoline stocks for the eighth week running. It said levels would probably rise by 1,1-million barrels to 214-million barrels for the week ending June 16.

“Relatively sluggish demand, coupled with high domestic output and imports, is expected to result in further increases of US gasoline levels in the coming weeks, especially with refinery runs likely to have risen as well by around .02%, week-on-week,” it said.

Heating oil and gasoline futures rose by almost two cents each to $1,9108 and $2,0060 a gallon (3,8 litres), while natural-gas futures fell more than 17 cents to $6,715 per 1 000 cubic feet.—Sapa-AP

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