Oil prices jump on Iran energy threat

Oil prices jumped Monday in reaction to a threat by Iran's supreme leader that his nation could jeopardize the world's oil supply if the West punished Tehran over its nuclear program. Light, sweet crude for July delivery rose $1.02 to $73.35 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-afternoon in Singapore. The contract rose Friday to $72.33 following the kidnapping of eight foreigners working on a drilling rig off the coast of Nigeria. The workers were released Sunday.

Oil prices gained last week despite rising U.S. inventories combined with an expected decision by the Organization of Petroleum Exporting Countries to leave its output quotas steady. OPEC's current production ceiling is 28 million barrels a day. Most cartel members are already producing all they can to take advantage of high prices. The lack of spare capacity around the world has led traders to build a premium into prices to account for a possible supply disruption that won't be offset.

Iran hints may play oil card in nuclear dispute

today.reuters.com :

Ayatollah Ali Khamenei, supreme leader of the world's fourth-largest oil exporter, said on Sunday that if the United States makes a "wrong move" toward Iran, energy flows in the region would be endangered. His remarks, which are likely to upset wary oil markets, come days before EU foreign policy chief Javier Solana is to deliver a package of incentives developed by six world powers to persuade Iran to abandon plans to make nuclear fuel.

"If you (the United States) make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered," Khamenei said in a speech about the dispute. Washington accuses Tehran of seeking to develop atomic weapons under cover of a civilian nuclear power program, a charge Tehran denies. The United States says it wants a diplomatic solution but has refused to rule out military action.

Khamenei listed what he said were U.S. failures in Iraq, Afghanistan, the Palestinian territories and elsewhere in the area. "You (the United States) are not capable of securing energy flows in this region," he said, addressing the crowd who were packed into Khomeini's mausoleum, south of Tehran.

International oil prices have stayed near record highs, above $70 a barrel, partly because of fears Iranian exports could be disrupted if the nuclear dispute escalates. Iran produces about 3.85 million barrels of oil a day.

(2006-06-05 07:42:05 SGT) [Energy] Permalink

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