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Oil Hits New High Above $74 on Supply Fears - ASHARQ AL-AWSAT English Archive
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LONDON (Reuters) Oil jumped to a fresh record high above $74 a barrel on Thursday after a steep drop in U.S. gasoline inventories fueled fears of tight summer supplies at a time of growing anxiety over Iran’s exports.

The United States on Wednesday reported a larger-than-expected drop in gasoline inventories of over 5 million barrels, adding to concern created by the shutdown of almost a quarter of Nigeria’s oil output and the row over Iran’s nuclear program.

“We’ve gone from comfortable U.S. gasoline stocks to average and seem to be heading very clearly toward the low of the range,” said Deborah White of SG SIB Commodities in Paris. “The market is worried about that.”

London’s Brent crude climbed as high as $74.22 a barrel, its eighth consecutive session to mark a new peak. It was trading down 3 cents at $73.70 a barrel by 1132 GMT.

U.S. May crude oil futures were down 3 cents to $72.14, hitting an all-time high of $72.49 earlier.

Gasoline stocks in the U.S. fell as demand averaged over 9.1 million barrels per day (bpd), 0.8 percent more than a year earlier, the U.S. Energy Information Administration (EIA) said.

“It’s all about gasoline and it has been since January,” said U.S. consultant PFC Energy in a report, adding that stocks are at the bottom of a five-year range in terms of days of supply.

Oil’s surge is part of a broader rally in commodities as investors seek to beat the returns available in equities or bonds. Gold hit a 25-year peak, silver reached a new 23-year high and platinum soared to a record on Thursday.

“We continue to see fund action,” SG’s White said. “They are coming in across the basket of commodities.”

Oil prices have nearly tripled since 2002 and analysts see few signs of the rally coming to a halt as levels push closer to 1980 inflation-adjusted peak of $82 a barrel, setting alarm bells ringing in consuming nations.

Record oil costs so far have yet to derail growth in oil demand or the world economy.

“We are not seeing any material demand destruction even at these prices,” said Finlay MacDonald at Britannic Asset Management, who helps run more than $30 billion in U.K. equities, including BP (BP.L) and Royal Dutch Shell (RDSa.L).

China, the world’s second-largest oil consumer, said on Thursday that its gross domestic product in the first quarter had grown 10.2 percent from a year earlier, marking a pick-up from 9.9 percent in the fourth quarter.

A day earlier, the International Monetary Fund hiked its 2006 forecast for global growth to 4.9 percent, the best since 1976 apart from 2004.

Tension over Iran’s resolve to expand its nuclear work kept prices on the boil as analysts fear the dispute could worsen, cutting shipments from the world’s fourth-largest oil exporter. Iran has said it does not plan to cut shipments.

The country’s oil minister said on Thursday that the OPEC member was happy with high oil prices, displaying the Islamic Republic’s increasingly hawkish stance.

“Naturally Iran is happy,” Iran’s Kazem Vaziri-Hamaneh told reporters. “High prices make any supplier happy.”

On Wednesday, Iranian President Mahmoud Ahmadinejad was quoted by the official IRNA news agency as saying oil had not yet reached its real value despite the recent price surge.

The perceived threat to Iranian supply comes on top of an actual disruption in Nigeria, where attacks by militants have cut the country’s output by almost a quarter.

Nigerian militants killed two people in a car bomb attack on an army barracks in the city of Port Harcourt, extending an onslaught against the world’s eighth largest oil exporter.

Separately, Venezuela’s President Hugo Chavez threatened to blow up the country’s oilfields in the event of a U.S. invasion, which he and his supporters from poor neighborhoods consider a possibility. Washington brushes off the possibility of an attack as fantasy.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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