Chron.com - 13/7/2006
Oil prices rose for a third day Thursday amid rising tension in the Mideast, including Iran being referred back to the U.N. Security Council over possible sanctions over its nuclear program and unrest in Israel and Lebanon.
"The key concern is Iran. The track it's on is not a positive one for the oil market," said Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia in Sydney.
World powers sent Iran back to the U.N. Security Council Wednesday after nuclear talks failed to yield agreements, stirring concerns about how OPEC's No. 2 supplier might respond.
Light sweet crude for August delivery rose 51 cents to $75.46 a barrel in electronic trading on the New York Mercantile Exchange. That's not far from the intraday record of $75.78 a barrel reached last Friday.
Heating oil futures increased 1.27 cents to $2.0311 per gallon and natural gas futures were up 2.2 cents to $5.804 per 1,000 cubic feet. Gasoline futures rose 9.1 cents to $2.2650 a gallon.
At London's ICE Futures exchange, the most active Brent contract for September gained 59 cents to $75.55 per barrel. August Brent was up 61 cents at $75 a barrel.
Gorey said the Israeli military's incursion into Lebanon after Hezbollah militants kidnapped two Israeli soldiers also had an indirect impact on the oil market.
"It's another thing that reminds you there is a lot of instability in the region where oil is produced and raises concerns that the problems could spill over into neighboring countries," he said.
Also, Wednesday's weekly U.S. government report showed a sharp decline last week in domestic crude oil inventories.
In its weekly petroleum report, the Energy Department said commercially available crude oil stocks shrank by 6 million barrels to 335.3 million barrels. Crude supplies are still 2 percent higher than last year.
Also on Wednesday, the International Energy Agency nudged its forecast for world oil demand growth for this year to its lowest level yet, while forecasting a rebound in demand growth next year. The Paris-based energy watchdog also predicted that the world's oil supply cushion would grow to more comfortable levels over the next five years.
The IEA trimmed its global oil-demand growth forecast for this year to 1.21 million barrels a day, but in its first outlook for 2007 it estimated demand would grow by 1.57 million barrels a day to a total of 86.37 million barrels a day.
The energy watchdog also said world oil demand is expected to increase by 2 percent per year in the next five years. Supplies are also expected to increase, but the IEA saw little prospect for significant price cuts.
"Without seeking to anticipate the geopolitical context, this (projected) level of spare capacity may not have a significant impact on prices," the IEA said.