SINGAPORE, AP – Oil prices jumped Monday in reaction to a threat by Iran’s supreme leader that his nation could jeopardize the world’s oil supply if the West punished Tehran over its nuclear program.
Light, sweet crude for July delivery rose $1.02 to $73.35 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore. The contract rose Friday to $72.33 following the kidnapping of eight foreigners working on a drilling rig off the coast of Nigeria. The workers were released Sunday.
July Brent crude futures on London’s ICE Futures rose $1.03 to $72.06 per barrel.
Iran’s supreme leader, Ayatollah Ali Khamenei, who has the final say on all state matters, addressed Western nations in a speech Sunday, saying: “If you make any mistake (punish or attack Iran), definitely shipment of energy from this region will be seriously jeopardized.”
Khamenei said the United States and its allies would be unable to secure oil shipments passing out of the Persian Gulf through the strategic Strait of Hormuz to the Indian Ocean.
“The price surge is a knee-jerk reaction to the remarks made by Iran’s supreme leader,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore. He noted, however, that Iranian President Mahmoud Ahmadinejad had indicated a breakthrough in negotiations was possible, but rejected a precondition to talks.
Contrary to Khamenei’s remarks, other Iranian officials have repeatedly ruled out using oil as weapon. Iran is the world’s fourth-largest oil exporter and has the second-largest reserves in the Organization of Petroleum Exporting Countries.
The kidnapping of oil workers in Nigeria also reminded traders that the African nation’s oil supply is not secure.
“These geopolitical events support high prices in the near term,” Shum said.
Also Monday, gasoline futures gained 2.75 cents to $2.2250 a gallon while heating oil prices rose 3.91 cents to $2.0536 a gallon. Natural gas prices were up 15.7 cents to $6.780 per 1,000 cubic feet.
Oil prices gained last week despite rising U.S. inventories combined with an expected decision by the Organization of Petroleum Exporting Countries to leave its output quotas steady.
OPEC’s current production ceiling is 28 million barrels a day. Most cartel members are already producing all they can to take advantage of high prices. The lack of spare capacity around the world has led traders to build a premium into prices to account for a possible supply disruption that won’t be offset.