Crude-Oil Prices Climb to a Seven-Month High on Iranian Nuclear Dispute April 11 (Bloomberg) -- Crude oil climbed, touching the highest since the days after Hurricane Katrina, on concern that supplies from Iran could be disrupted by a confrontation over the country's nuclear program.
``We are in a market that's mainly driven by geopolitical events,'' said Michael Lynch of Strategic Energy & Economic Research in Winchester, Massachusetts. ``The headlines that have been flashing are not good.''
Iranian President Mahmoud Ahmadinejad said his country completed its first enrichment of uranium two days ago. The dispute with Iran over its nuclear program was stirred by an April 8 article in the New Yorker magazine alleging the U.S. is weighing air strikes on suspected weapons facilities.
Crude oil for May delivery rose 26 cents, or 0.4 percent, to $69 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil touched $69.45 a barrel, the highest since Sept. 2. The futures are nearing the record $70.85 reached on Aug. 30 after Katrina ravaged U.S. Gulf of Mexico oil production.
Brent crude oil for May settlement rose 72 cents, or 1.1 percent, to $69.47 a barrel on the London-based ICE Futures exchange. Futures touched $69.70, the highest since the contract began in 1988 and set a record for a second straight day.
Oil has gained 13 percent so far this year in New York, boosted by the Iranian standoff and by insurgent attacks in Nigeria, Africa's biggest oil producer. The violence in Nigeria has cut output by almost a quarter.
Iran Confrontation
Iranian scientists enriched a supply of uranium to a concentration of 3.5 percent, the Islamic Republic's nuclear program chief, Gholamreza Aghazadeh, said in Masshad before the president made his announcement at a packed auditorium. That is enough to produce nuclear fuel, though an atomic weapon requires enrichment of almost 100 percent. Their comments were carried live by international broadcasters.
The development may heighten tensions between Iran and the United Nations Security Council, which gave Iran until the end of this month to shut down its program.
The U.S. and its European allies allege Iran is using its civilian research program to develop weapons. Seymour Hersh wrote in the New Yorker that the U.S. might use aerial bombing or tactical nuclear weapons against nuclear sites in Iran or seek to change the regime there.
``If the Iranian situation cools off prices will come off sharply,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina.
Gasoline Consumption
Gasoline rose amid predictions that higher demand and changes in U.S. fuel rules might spawn shortages. The U.S. Energy Department said today that gasoline consumption will rise 1.5 percent this summer.
Gasoline using MTBE, or methyl tertiary butyl ether, is being phased out because refiners don't want to be liable for groundwater contamination caused by the additive. That may cause logistical problems as refiners shift to a gasoline blend designed for use with ethanol.
Refiners are also being required to reduce the sulfur content in 80 percent of diesel fuel sold from 500 parts per million to 15. That has required the installation of new equipment and might make breakdowns more likely this year.
``The switch to ethanol in May and the introduction of low- sulfur diesel by the end of the summer make refined product markets more vulnerable to disruptions,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``All we need is a sprinkling of stories to send us higher.''
Summer Gas Prices
U.S. motorists can expect to pay an average $2.62 a gallon at the pump this summer, 25 cents more than last year, the Energy Department said in its Summer Fuels Outlook released today in Washington. Higher oil prices, growing gasoline demand and the cost of new fuel specifications are behind the price rise.
Gasoline futures, based on wholesale prices, rose 4.58 cents, or 2.3 percent, to $2.055 a gallon in New York. Gasoline for May delivery touched $2.06, the highest since Oct. 5.
U.S. crude-oil inventories rose 2.1 million barrels to 342.8 million in the week ended March 31, the Energy Department reported last week. The increase left stockpiles 12 percent higher than the five-year average for the week.
Stockpiles may rise further in the weeks ahead because spot prices are cheaper than futures for oil delivered later in the year, a price difference traders call ``contango.'' Crude oil for June delivery rose 24 cents to $70.35 a barrel, a $1.35 premium over the May contract.
``This is a contango market so inventories aren't having the effect that they normally would have,'' Emerson said.
To contact the reporter on this story: Mark Shenk in New York at [email protected]
Last Updated: April 11, 2006 14:49 EDT
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