LONDON (Reuters) – Oil surged to a record high above $72 on Tuesday on concern that Iran’s nuclear stand-off with the West could cut oil exports from the world’s fourth-largest crude exporter.
In London, North Sea Brent crude oil jumped 74 cents to an all-time high of $72.20 a barrel as Iran and the West exchanged increasingly sharp words over the Islamic Republic’s determination to push ahead with a nuclear program.
U.S. West Texas Intermediate crude oil hit a record $70.88, smashing through its end-August high of $70.85.
“The Iranian situation is making us all very nervous… We don’t seem to be getting anywhere on the diplomatic solutions,” said Deborah White, an analyst at SGCIB in Paris.
With almost a quarter of Nigerian oil production still shut after rebel attacks two months ago, oil consumers feel almost as vulnerable as they did during the Arab oil embargo in the 1970s.
Oil prices have soared from $20 at the start of 2002 and are now nearing the inflation-adjusted peaks of over $80 hit in 1980, the year after the Iranian revolution.
Initially fired by strong demand from the United States and the fast-growing economies of China and India, the rise has accelerated over the past year on worries over supplies.
Iraq’s once significant oil industry is in crisis, Nigerian exports have been slashed by rebel attacks on the world’s eighth biggest exporter and consumers are worried that Iran’s exports could fall victim to its nuclear dispute with the West.
The rally has also been aided by big investment funds putting their money into commodities in the hope of higher returns than they get from equities or bonds.
President Mahmoud Ahmadinejad declared Iran a nuclear power last week, saying it had enriched uranium to the level used in power stations. On Tuesday, he delivered a warning to any nation considering attacking the Islamic republic.
“Today, Iran’s army is one of the most powerful armies in the world and it will powerfully defend the country’s political borders and the nation,” Ahmadinejad said in a speech during an armed forces parade.
“It will cut off the hands of any aggressors and will make any aggressor regret it,” he added.
The United States has said it wants a diplomatic solution to the standoff but has not ruled out a military option.
It meets with world powers on Tuesday to consider targeted sanctions against Iran and has said it wants the U.N. Security Council to be ready to take strong diplomatic action.
The disruption to Nigeria’s crude output will become more critical as the U.S. driving season begins next month. Analysts reckon gasoline stocks in the world’s top oil user fell again last week. ()
“Nigerian crudes are rich in gasoline, unlike crudes from Saudi Arabia and the Middle East, which are sour, heavier and harder to process,” said Tetsu Emori, chief commodities strategist with Mitsui Bussan Futures.
Ministers from the Organization of the Petroleum Exporting Countries, who will gather informally this weekend during an International Energy Forum meeting in Doha, have said there is nothing more the group can do to bring down prices.
A senior OPEC delegate told Reuters on Tuesday the group considered current prices too high, and they had nothing to do with the realities of supply and demand.
“OPEC believes strongly that prices are too high and nobody wants to see these prices,” the delegate told Reuters. “(But) it has nothing to do with fundamentals.”