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Oil Rises on Weak Dollar, Iran Tension | ASHARQ AL-AWSAT English Archive 2005 -2017
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LONDON (Reuters) – Oil rose about $2 on Tuesday due to the dollar’s weakness and concerns over the main Gulf oil shipping route amid lingering tensions surrounding Iran.

However the gains were capped by weakening U.S. demand.

U.S. crude rose $1.81 to $141.81 a barrel by 0909 GMT. On Monday it hit a record high of $143.67.

London Brent crude rose $2.13 to $141.96

“The market is torn between a weaker dollar and the fact that demand continues to erode,” said an oil trader, who asked not to be named.

“Of course, Iran is always there bubbling away.”

The dollar weakened against the yen and the focus has shifted to the European Central Bank’s meeting.

Speculation has mounted that Iran could be attacked over its disputed nuclear programme.

Iran’s Revolutionary Guards said Iran would impose controls on shipping in the Strait of Hurmuz, the vital Gulf oil route, if attacked and warned of reprisals, a newspaper reported last week.

U.S. naval chiefs are concerned Iran could resort to mining the strait, according to the U.S. Energy Information Administration (EIA).

Roughly 40 percent of the world’s traded oil moves through the narrow waterway separating Iran from the Arabian Peninsula.

“The market has been worried about the tensions involving Iran and that remains a supportive factor for the oil price,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia in Sydney.

Oil prices have risen more than 40 percent this year, eroding fuel demand especially in the Untied States, the world’s largest oil consumer.

The U.S. government said on Monday domestic oil demand in April was the lowest for that month since 2002.

Oil consumer countries have repeatedly asked OPEC to produce more oil but Saudi Arabia’s king said that would not help bring prices down.

“People who think that oil prices will go down once production is raised are wrong because there are indications the prices will remain high,” a Kuwaiti newspaper on Tuesday quoted King Abdullah, the ruler of the world’s largest oil exporter, as saying.