12 Jul 2008

Oil briefly hits record over $US147 a barrel

6:00 am on 12 July 2008

World oil prices leapt $US5 to a record high above $US147 a barrel amid growing worries of threats to supplies from Iran and Nigeria and a strike by Brazilian oil workers next week.

The gains were trimmed back later in the day, however, as dealers focused on US economic turmoil that has already triggered a significant slowdown in oil consumption in the world's biggest energy user.

US crude rose $US2.15 to $US143.80 a barrel by 1648 GMT after climbing as high as $US147.27 earlier in the day.

It rose $US5.60 or 4% a barrel on Thursday in a late burst of buying activity. London Brent crude was up $US1.52 at $US143.55 a barrel.

A spate of missile tests by Iran, the world's fourth-largest oil exporter, in the last two days against a backdrop of rising tensions with Israel and the United States has affected prices.

Iran has threatened to strike back at Tel Aviv as well as US interests in a key oil shipping route if it is attacked over its nuclear programme, which Israel and the West fears is aimed at making nuclear weapons.

Adding to jitters, the main militant group in Nigeria's oil-producing region has said it is abandoning a cease-fire.

Rebel attacks on oil infrastructure in Nigeria, the world's eighth-biggest exporter, have also been partly responsible for the nearly 50% rise in prices this year.

Workers at Brazil's Petrobras will launch a five-day strike next week that would affect would offshore platforms that account for more than 80% of daily oil output of around 1.8 million barrels.

Oil prices have risen seven-fold since 2002 amid surging demand from China and other developing economies.

Investors have also recently flocked to oil and other commodities as a hedge against rising inflation and a weak dollar.

Concern in the United States that the two largest mortgage financing providers, could run short of capital added to inflation worries by reducing the chances of an interest rate hike this year by the US Federal Reserve.

Oil has continued to rise despite efforts by top exporter Saudi Arabia to raise production to its highest rate in three decades.