LONDON, AP – Oil prices rose Monday following an escalation of violence in the Middle East and an oil spill in one of Russia’s largest export pipelines.
The market has been focusing on the nearly three weeks of fighting between Israel and Hezbollah guerrillas in Lebanon, fearful of possible supply interruptions in the region, particularly from Iran, OPEC’s No. 2 supplier and a backer of Hezbollah.
An Israeli airstrike Sunday killed at least 56 Lebanese, mostly women and children, when it leveled a building where they had taken shelter. Israel agreed to a 48-hour suspension of aerial activity over southern Lebanon afterward, but the brief respite ended when Israeli planes hit targets in southern Lebanon on Monday after Hezbollah guerrillas blasted an Israeli tank and injured three soldiers.
More than 500 Lebanese and 50 Israelis have been killed since the fighting broke out on July 12.
Sunday’s attack prompted U.S. Secretary of State Condoleezza Rice to cut short her Mideast diplomatic mission. Lebanese Prime Minister Fuad Saniora demanded a cease-fire and said talk of a larger peace package must wait until the firing stops.
Paul Harris, head of energy at Bank of Ireland Global Markets in Dublin, said Brent crude prices would likely move on developments in the Israel-Lebanon conflict and would respond to any progress in diplomatic efforts to end the violence.
Russian officials said Monday that there had been a spill Saturday in the western province of Byransk, near Russia’s western border with Ukraine and Belarus. The 2,485-mile Druzhba pipeline has the capacity to ship over 1.2 million barrels a day and generally works at or close to its full capacity.
Light sweet crude for September delivery on the New York Mercantile Exchange rose 38 cents to $73.62 by afternoon in Europe. September Brent at London’s ICE Futures exchange rose 56 cents to $73.95 a barrel.
Natural gas futures jumped 35 cents to $7.531 per 1,000 cubic feet. Gasoline futures dropped more than a cent to $2.2205 per gallon and heating oil futures were up less than half a cent to $1.9450 per gallon.
In southern Nigeria, more than 20 armed attackers occupying a crude oil flow station left late Sunday and freed 16 civilians and eight military personnel they had been holding hostage for a week, police said.
The invasion of the flow station, which handles 35,000 barrels per day, coincided with a spate of militant attacks and major leak on a pipeline carrying 210,000 barrels per day. The attacks have cut production in Africa’s biggest oil exporter by over a quarter.