Oil near $138, Iran denies rumoured attack

Oil rose for a third straight session on Tuesday to more than $138 a barrel, boosted by a rumoured attack on Iran’s nuclear facilities, which was denied.

“This is just a rumour. No attack against Iran’s nuclear facilities has taken place,” a senior Iranian nuclear official said.

United States crude for August delivery was up $1,17 at $137,91 a barrel by 12.34am GMT, after settling up $1,38 on Monday. It hit a record high of $139,89 on June 16.

London Brent crude was up $1,23 at $137,14 a barrel.

Tension over Iran’s nuclear programme has played a big part in oil’s rise to record levels near $140 a barrel.

The European Union this week imposed new sanctions on Iran, including an asset freeze on its biggest bank.

Western powers suspect Iran, the world’s fourth biggest oil exporter, wants to make nuclear arms, but Tehran denies this.

Friday’s New York Times quoted US officials as saying Israel, which is believed to have nuclear weapons of its own, had carried out a military exercise, apparently as a rehearsal for a potential bombing of Iran’s nuclear facilities.

Analysts are worried heightened tensions between Iran and the West could threaten the Straits of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40% of the world’s traded oil flows.

Nigeria strike
Nigeria’s senior oil workers union began a limited strike at Chevron offices on Monday. The stoppage has not disrupted production yet, but it has added to concerns about further disruption to supplies from the Opec nation, where militant attacks shut 340 000 barrels of daily production last week.

“The market is focusing on the immediate impact of this Nigerian attack that reduced production,” said Tony Nunan, risk management executive at Tokyo-based Mitsubishi.

Supply disruptions in Nigeria have helped push US crude up by more than 40% this year.

Kuwait, one of the few Opec members with spare capacity, will increase its oil output by 300 000 barrels per day starting mid-2009, and would spend $55-billion on oil projects in the coming five years, state news agency Kuna reported.

Kuwait’s pledge follows a meeting of top energy policy makers in Jeddah at the weekend to discuss record prices, where Saudi Arabia, the world’s largest oil exporter, said it would pump more oil.

The view of Opec is still that there is no shortage of oil and that record prices are due to other factors, including the weak US dollar and funds seeking new investment areas.

Chakib Khelil, president of the Organisation of the Petroleum Exporting Countries, said: “As far as fundamentals are concerned I think we have equilibrium between supply and demand.”

The dollar will remain in focus ahead of the US Federal Reserve’s interest rate decision on Wednesday. The Fed is expected to leave interest rates unchanged, which could be bearish for the dollar and supportive for oil.

US weekly data on crude oil inventories are also due on Wednesday. Crude stocks are likely to have risen for the first time in six weeks last week, as imports rose for the second week in a row, a Reuters preliminary poll showed.

The poll showed forecasts for a 200 000-barrel rise in crude stocks last week, a 1,4-million-barrel gain in distillates and a 400 000-barrel rise in fuel inventories. - Reuters

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