Saturday, July 15, 2006

Oil sets record on supply jitters

Oil sets record on supply jitters
Copyright by Bloomberg News, Reuters
Published: July 14, 2006


NEW YORK Crude oil rose past $78 a barrel Friday for the first time as concern mounted over escalating violence in the Middle East, the source of 30 percent of the world's oil.

Israeli forces attacked Lebanon for a third day. Hezbollah, a militant organization backed by Iran and Syria, sparked the conflict when its forces kidnapped Israeli soldiers in a cross- border raid.

Iran, embroiled in a dispute with the United Nations over its nuclear research, warned Israel against expanding the conflict.
"I'm not going to say we're going to $100 a barrel right away, but neither am I going to rule it out," said Peter Beutel, president of Cameron Hanover, an energy consultancy in New Canaan, Connecticut. "If events drag Iran into the situation and it deteriorates to the point that they want to block the Strait of Hormuz, and we get a hurricane, yes, we will see $100."
In late trading on the New York Mercantile Exchange, crude oil for August delivery was 70 cents, or 0.9 percent, higher at $77.40 a barrel after touching $78.40, the highest point since trading began in 1983. Prices were up 4.5 percent for the week - the biggest weekly gain since January - and have risen 34 percent from a year ago.

Iran has about 12 percent of the world's oil reserves. Almost a quarter of the world's oil is shipped through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Gulf.

"Certainly if the Syrians or the Iranians were to somehow get involved in this fracas, things could get really ugly really fast in terms of a commodity pricing standpoint," said Ted Harper of Frost National Bank in Houston. "Given the geopolitical tensions, the wrong kind of event could easily move oil above $100."

Hezbollah fired about 140 rockets into northern Israel in 48 hours, including one that reached Haifa late Thursday, the Israeli military said. A separate operation in the Gaza Strip began June 28 after a soldier was abducted by Palestinian groups, including Hamas.

"The high level of violence a few hundred miles from the oil fields makes traders nervous," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "I don't think this is spreading, but every possibility has to be accounted for."

Heat lifts natural gas prices

Natural gas prices rose for a fifth consecutive day in New York as hot weather increased usage of the fuel at power plants, Bloomberg News reported.

Temperatures were predicted to soar across the United States, lifting demand for fuel to produce electricity to power people's air conditioners.

In late New York Mercantile Exchange trading, natural gas for August delivery rose 28.1 cents to $6.41 per million British thermal units.

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