VIENNA, Austria (AP) -Oil prices rose Friday on news that Iran had defied a U.N. Security Council deadline on its nuclear program. But prices were held in check by expectations that the standoff was not likely to result in major sanctions against OPEC’s second-largest producer.
A threatened strike by Nigerian oil workers sent bullish signals. But the upward trend was also tempered by plans from BP PLC to increase output at its huge oil field at Prudhoe Bay.
Light, sweet crude for October delivery gained 39 cents to $70.65 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Brent crude for October delivery on London’s ICE Futures exchange rose 35 cents to $70.60 a barrel.
The contract on Thursday rose 23 cents to settle at $70.26 a barrel, after Iran defied a United Nations deadline to stop enriching uranium, opening doors for sanctions.
Iran’s hard-line president, Mahmoud Ahmadinejad, lashed out at the United States Thursday, calling it “tyrannical” and insisting Tehran would not be “bullied” into giving up the right to use nuclear technology.
President Bush called for “consequences to Iran’s defiance,” saying the “world now faces a grave threat from the radical regime in Iran.”
But most market participants did not expect any major sanctions to be imposed against the country as Russia and China were likely to oppose such a move.
Iran’s defiance had been expected by most market participants, and China and Russia would be expected to veto any suggestions of U.N. sanctions against Iran, said Victor Shum, energy analyst with Purvin & Gertz in Singapore.
“The situation will likely drag on with no significant development on either side, but will continue to provide a high floor for oil prices,” he said.
Commonwealth Bank of Australia commodity strategist Tobin Gorey said the market may start reassessing the need to maintain a premium that fears over potential disruptions to Iranian supplies has placed on oil prices.
Analysts have said Iranian concerns added at least $10 a barrel to oil futures.
Gorey said also that high crude prices reflected strong global demand and could continue climbing.
“The oil market, both crude and refined level, is still only just keeping up with demand,” Gorey said.
In Vienna, “a further bullish trend … from Nigeria, where oil workers announced a strike in two weeks” was noted by PVM Oil Associates.
“Although this strike is not expected to result in … shortages of oil output, it is symptomatic of the ongoing uncertain political situation the region,” it said.
Still, supply concerns were tempered after BP PLC hinted that production at Prudhoe Bay could be restored to normal levels earlier than expected.
In other Nymex prices, gasoline futures added 0.69 cent to $1.7900 a gallon while heating oil was essentially steady at $2.0128 a gallon. Natural gas futures dropped nearly 12 cents to $5.93 per 1,000 cubic feet.
U.S. markets will be closed Monday for Labor Day.