/ 27 October 2007

Oil price hits record high on Iran tensions

World oil prices surged to historic highs on Friday, breaching $92 for the first time in New York amid rising tension in crude-rich Iran and tightening United States energy supplies.

New York’s main futures contract, light sweet crude for delivery in December, soared to a record intraday high of $92,22 per barrel before settling at an all-time closing high of $91,86, up $1,40 on the day.

In London, Brent North Sea crude for December delivery struck an all-time pinnacle of $89,30 per barrel on Friday. It later settled at $88,69, up $1,21.

Crude futures have rocketed by about $10 dollars in a month and by $30, or 50%, in a year.

“Supply tightness and developments surrounding Iran remain the focus of attention,” Sucden analyst Michael Davies said on Friday.

The United States on Thursday ratcheted up pressure on Iran over its nuclear drive and alleged backing for terrorism with a raft of new sanctions against the Islamic republic’s military and banks.

Crude futures had leapt by more than $3 on Thursday in reaction to the news, before extending their gains on Friday.

The White House, meanwhile, rejected any parallels between its Iran rhetoric and the run-up to the Iraq invasion of 2003, adding it had not ruled out the use of force but was “very hopeful” of avoiding war.

Sucden’s Davies, meanwhile, added that oil prices were winning support from a weak dollar, which makes commodities priced in the US currency cheaper for buyers using stronger units.

The dollar slumped to a record low against the euro on Friday after poor US economic data heightened expectations of a fresh cut to US interest rates next week, dealers said.

Others said oil prices were also being supported by Opec’s (the Organisation of the Petroleum Exporting Countries) hesitance to increase production and rising tensions elsewhere in the Middle East.

Iraqi ministers held crisis talks on Friday seeking to persuade an increasingly impatient Turkey against launching military strikes against rebel Kurd bases in northern Iraq, which is an oil-producing region.

The talks broke up after 90 minutes, however, and it was not immediately known if and when they would resume. But Iraqi Defence Ministry spokesperson Muhammed Askeri said the meeting had produced “positive” results.

Another factor pushing up oil prices are tight energy supplies in the United States, the biggest consumer of energy.

The US Energy Information Administration (EIA) said on Wednesday that stockpiles of crude had plunged by 5,3-million barrels in the week ending October 19. The market had expected a gain of 960 000 barrels.

Inventories of US distillates, which include diesel and heating fuel, sank by 1,8-million barrels last week. — AFP