11 Jul 2008

Oil surges past $US141 on Iran tensions

3:28 pm on 11 July 2008

Oil prices jumped 4 percent to above $US141 a barrel on Thursday amid threats to production in Nigeria and Brazil and an additional missile test by Iran that escalated tensions with the West.

US crude settled up $US5.60 at $US141.65 a barrel, off a session high of $US142.10 a barrel.

London Brent crude settled $US5.45 higher at $US142.03 a barrel.

Concerns that tensions between Iran and the West over Tehran's nuclear program could lead to an oil supply disruption have added to bullish sentiment.

Iran tested more missiles in the Gulf on Thursday, and the United States reminded Tehran that it was ready to defend its allies.

But a US official said there was no information to confirm rumors of a third Iran missile test late on Thursday as prices surged near the settlement.

Prices were also affected when the main militant group in Nigeria's oil-producing Niger Delta said it was abandoning a cease-fire, raising concern of further disruptions to the OPEC nation's exporters.

Rebel attacks on oil infrastructure in Nigeria, the world's eighth largest exporter, have helped push crude prices to record highs over $US145 this month, adding to a nearly 50% rise in prices this year.

Further support for oil prices came from the US weak dollar, which fell on renewed credit worries. Investors have flocked to oil and other commodities this year as a hedge against rising inflation and the weak greenback.

Tension set to ease in 2009 - IEA

Tension on oil markets is set to ease early next year amid a US slowdown, the IEA has forecast, noting strong output by OPEC this year.

The International Energy Agency said that despite uncertainty on the length of the US downturn, demand in advanced countries seemed to be on a weaker trend although it forecast a global increase in demand of 1% per cent next year.

However, the agency cautioned that demand for oil would remain robust in Asia, the Middle East and Latin America, fuelled by vibrant economic momentum and continued low fuel prices.

On the supply side of the equation, the IEA found that production by the Organisation of Petroleum Exporting Countries in the past nine months is "well ahead" of the same period last year.

Supplies by non-OPEC producers are seen remaining strong in late 2008 and rising next year.

Global demand for oil is expected to come to 87.7 million barrels a day in 2009 - an increase of just 1%. from the level of 86.9 million barrels a day forecast for 2008.