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Oil soars to record above US$145 amid concerns over hefty drop in US stockpiles, Iran conflict - ASHARQ AL-AWSAT English Archive
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Iranian Foreign Minister Manouchehr Mottaki speaks during a news conference at the United Nations headquarters in New York July 2, 2008 (REUTERS)

Iranian Foreign Minister Manouchehr Mottaki speaks during a news conference at the United Nations headquarters in New York July 2, 2008 (REUTERS)

KUALA LUMPUR, Malaysia (AP) – Oil soared to a record above US$145 a barrel Thursday in Asia, fueled by concerns over a larger-than-expected drop in U.S. stockpiles and the threat of conflict with Iran.

Expectations that the European Central Bank will raise interest rates later Thursday is expected to weaken the U.S. dollar and drive oil prices even higher, as investors turn to commodities as a hedge against a falling greenback, traders said.

“Even though the rise of European interest rates has been priced into oil, an official announcement by the ECB will still add momentum to oil prices,” said Victor Shum, an analyst with Purvin & Gertz in Singapore.

Prices may also be lifted with increased buying before U.S. oil markets close Friday for the Fourth of July holiday.

“There are numerous supply side concerns that support a strong pricing. As we head into a long weekend in the U.S., it’s likely that we will see pricing bubbling away at US$145,” Shum added.

Late afternoon in Singapore, light, sweet crude for August delivery was up US$1.28 at US$144.85 a barrel in Asian electronic trading on the New York Mercantile Exchange.

Earlier in the session, it rose as high as US$145.09 a barrel, a trading record.

That was after setting a new closing record for floor trade Wednesday at US$143.57, a full US$2.60 above the previous close.

The latest spike means a barrel of crude has gone up by more than half since the end of last year, when oil was going for US$96 a barrel.

Meanwhile, in London on the ICE Futures exchange, Brent crude futures rose to a trading record of US$145.96 a barrel before retreating to US$145.74, up US$1.41.

The Energy Department’s Energy Information Administration said Wednesday crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts had predicted. However, the report offered a mixed picture of energy use by the world’s thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide, suggesting record fuel prices are prompting a shift in American driving habits.

Ongoing rhetoric about possible attacks on Iran, the world’s fourth-largest oil producer and OPEC’s second-largest exporter, also left the market jittery.

Traders are worried Tehran could try to halt shipments and seize control of the strategically important Strait of Hormuz if attacked by Israel or the United States. About 40 percent of the world’s tanker traffic passes through the Middle Eastern choke-point.

Iran’s foreign minister did not rule the possibility that Iran could try to restrict oil traffic in the strait if the country was attacked. “In Iran we must defend our national security, our country and our revolutionary system and we will continue to do so,” Foreign Minister Manouchehr Mottaki said in an interview with The Associated Press in New York.

Mottaki said he does not believe Israel or the United States will attack, however, calling the prospect of another war in the Middle East “craziness.” A senior U.S. military commander vowed to ensure that the strait remains open. “We will not allow Iran to close it,” said Vice Adm. Kevin Cosgriff, commander of the 5th Fleet based in Bahrain, after talks with naval commanders of Persian Gulf countries in the United Arab Emirates.

The saber-rattling has left energy traders on edge as they try to ascertain the likelihood of a Middle East flare-up and the effect it could have on the world’s already tight supply of oil.

In other Nymex trading, heating oil futures added 4.49 cents to US$4.1164 a gallon (3.8 liters), while gasoline futures rose 2.29 cents to US$3.5723 a gallon. Natural gas futures gained 13.7 cents to US$13.526 per 1,000 cubic feet.

Cars queue for gas at a petrol station in Baghdad's Palestine street, Iraq, July 2, 2008 (AP)

Cars queue for gas at a petrol station in Baghdad’s Palestine street, Iraq, July 2, 2008 (AP)

U.S. Navy Vice-Admiral Kevin J. Cosgriff, commander of the U.S. Navy's 5th fleet based in Bahrain, speaks during the Gulf Naval Commanders conference in Abu Dhabi July 2, 2008 (REUTERS)

U.S. Navy Vice-Admiral Kevin J. Cosgriff, commander of the U.S. Navy’s 5th fleet based in Bahrain, speaks during the Gulf Naval Commanders conference in Abu Dhabi July 2, 2008 (REUTERS)

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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