FUTURES MOVERSCrude rallies on concern Iran may halt...

FUTURES MOVERS
Crude rallies on concern Iran may halt shipments
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By Ciara Linnane, MarketWatch
Last Update: 4:05 PM ET Jun 5, 2006

NEW YORK (MarketWatch) -- Crude-oil futures closed higher Monday after a warning from the world's fourth-largest oil exporter, Iran, that it may stop shipments if it is provoked by western powers seeking to pressure it to end nuclear research.
Crude for July delivery closed up 27 cents at $72.60 a barrel, having earlier touched $73.40 a barrel, its highest level since May 12.
"The Iran factor is like a bad tennis match and traders will be hard pressed to get any clear cut answers until either Iran fully capitulates or begins to interrupt flow of oil though the Strait of Hormuz," said Kevin Kerr, veteran trader and editor of Global Resources Trader, a newsletter published by MarketWatch.
Over the weekend, Iran's supreme leader warned the U.S. that actions it takes could result in Iran halting shipments from the region.
"If you make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered," Ayatollah Ali Khamenei warned on state television, the BBC reported.
"This shows that he is well aware of what can cause price instability and wants the world to know Iran can certainly cause turmoil if provoked," said John Person, president of Nationalfutures.com.
Khamenei's comments come just days after the permanent members of the United Nations Security Council and Germany agreed on a package of incentives to offer Iran in an attempt to persuade it to halt its nuclear research.
Tehran maintains it's aiming to create a civilian energy program, while western powers fear it is trying to create nuclear weapons.
The incentive package, due to be presented to Tehran this week, is part of a broader effort to solve the dispute diplomatically, but Khamenei's words suggest Iran has not ruled out some sort of U.S.-backed military action against it.
U.S. Secretary of State Condoleezza Rice responded on U.S. television by cautioning not to place too much emphasis on the Iranian threats.
"The Iranians have made sure that any hint of considering the incentives is countered by a steadfast commitment to continue enrichment activities," said Fimat USA energy analyst Mike Fitzpatrick.
Meanwhile, Saudi Arabia's oil minister said the world's biggest petroleum exporter has cut output because demand has declined, The Wall Street Journal reported.
Ali Naimi said global oil supplies are full and many refiners have closed down for routine maintenance, the paper said. He denied that the kingdom is trying to boost prices by limiting supply.
Against this background, traders will carefully scrutinize this week's U.S. supply data, which will include demand figures from the Memorial Day weekend, the traditional start of the summer driving season.
"I expect a draw in gasoline inventories due to holiday travel, and I see gasoline prices continuing to remain firm," said Person. "A strong chance exists for new contract highs and crude oil to hit over [$75] in the next few trading sessions."
In Nigeria over the weekend, eight foreign oil workers who were kidnapped were released. They had been taken on Friday by a group seeking to keep more of the country's oil revenues at home.
"As we have been saying all along, correction may occur from time to time, but the elements that brought us here are going to get a lot worse before they get better," said Fimat's Fitzpatrick.
Gasoline futures closed down 3.3 cents at $2.1642 a gallon, pulling back from a high of $2.23 a gallon.
Heating oil was up 2.8 cents at $2.043 a gallon and natural gas was down 16 cents at $6.46 per million British thermal units.
In energy-linked equities trading, benchmarks tracking the oil and gas sectors were lower.
The Amex Natural Gas Index ($XNG :
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4:57pm 06/05/2006
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$XNG405.59, -11.17, -2.7% ) finished down 2.7% at 405.60 while the CBOE Oil Index ($OIX :
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4:49pm 06/05/2006
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$OIX582.69, -15.75, -2.6% ) was down 2.6% at 582.69.
Taking a broad measure of the commodity-futures markets, the Reuters/Jefferies CRB Index was down 0.4% at 348.78. See more of the latest prices for commodity futures End of Story