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Oil hits record high above $76 a barrel

Oil surged to a record high above $76 a barrel on Thursday on renewed worries over supply from major exporter Nigeria and as conflict between Israel and Lebanon heightened international tensions.

Prices also rose as the Iran nuclear row headed back to the United Nations Security Council, North Korea walked out of talks with South Korea and crude inventories in top consumer the United States fell more than expected.

”Geopolitical tensions have stepped up — we are moving on to a new phase in Iran and Israel,” said Mike Wittner of investment bank Calyon. ”In the end, geopolitical risk is about a current supply disruption getting worse or a new one happening.”

US crude traded $1,55 higher at $76,50 a barrel by 4.06pm GMT, after hitting a record $76,55. London Brent was up $1,86 at $76,25 after reaching a record $76,31.

In Nigeria, two suspected explosions at a crude pipeline operated by Agip, a unit of Italy’s Eni, caused oil spills, Nigerian officials said. Eni denied reports of sabotage and extensive oil spills and said damage would be repaired soon.

Royal Dutch Shell has already had to shut down 473 000 barrels per day of Nigerian supply, almost a quarter of output in Africa’s top oil supplier, due to attacks by rebels.

Adding to Middle East tension, Israel blockaded Lebanese ports and struck Beirut airport on Thursday, expanding reprisals that have killed 53 civilians in Lebanon since Hizbollah guerrillas captured two Israeli soldiers a day earlier.

Supply breaks and growing Middle East tension mean oil prices may rise further, investors say. The Middle East pumps about a quarter of world output, although neither Israel nor Lebanon are producers.

”The next stop is $80,” said Mark Matthias, chief executive of investment specialist Dawnay Day Quantum. ”That’s what the market is looking at now.”

No shortage

Qatari Oil Minister Abdullah al-Attiyah said there was no shortage of crude oil in world markets, blaming geopolitical tensions for the surge to record-high prices.

”The main thing is that we see that there is no shortage in the market at all,” he told reporters. ”Speculators are using the geopolitical situation to their benefit and we are seeing how the oil prices are reacting.”

Iranian President Mahmoud Ahmadinejad said on Thursday the world’s fourth-largest oil exporter would not abandon its right to nuclear technology after Tehran’s case was referred back to the UN Security Council.

And in Asia, North Korea blamed the South for the collapse of their first high-level talks since Pyongyang’s missile tests sparked a regional crisis, saying Seoul would ”pay a price” for the failure.

Oil has rallied from below $20 in January 2002 driven by rising demand led by the US and China, the second-largest oil consumer. Robust US demand and falling inventories also supported oil’s gain on Thursday.

US crude inventories slid 6-million barrels last week as imports fell, a government report said on Wednesday. The drop was five times larger than the 1,2-million barrels forecast among analysts polled by Reuters.

US motorists, who use over 40% of the world’s gasoline, bought 1,7% more fuel in the past four weeks compared with a year ago. The data covered the Independence Day holiday weekend when annual gasoline demand peaks. — Reuters

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