LONDON, 19 April 2006 — World oil prices hit record peaks yesterday above $72 in London and close to $71 in New York as the market fretted over a possible military conflict between the United States and Iran.
The price of New York’s light sweet crude hit a historic high of $70.88 per barrel, beating the previous record of $70.85 set on Aug. 30, 2005, when Hurricane Katrina had ravaged oil facilities on the US Gulf Coast.
Also yesterday, the price of Brent North Sea crude oil hit a record $72.20 per barrel as the market feared that an attack on Iran could lead to a disruption of its oil exports. Washington has accused Iran, the world’s fourth-biggest crude producer, of working secretly to build nuclear weapons under cover of a nuclear energy program it is developing with Russian assistance. Iran denies this charge and says the program is strictly for producing nuclear energy.
“People are still concerned about Iran and potential military action,” Global Insight analyst Simon Wardell said yesterday.
“It looks like there’s going to be a run toward $75,” he added.
At about 1630 GMT, New York’s main contract, light sweet crude for delivery in May, had climbed 30 cents from Monday’s close to $70.70 in pit trade. Brent crude for June delivery jumped 36 cents to $71.82 in electronic deals.
Wardell warned that prices could rocket to above $150 per barrel if Iran retaliated to any US attack by disrupting oil shipping off its coastline.
“If they close the Gulf for a length of time to shipping, then certainly we could look at $150, probably higher.” Yesterday, US President George W. Bush refused to rule out force, saying that “all options are on the table” regarding Iran, as top world powers met in Moscow to align diplomatic strategy.
Adjusted for inflation, current oil prices remain below levels reached after the 1979 Iranian revolution when they surged to upward of $80.0 per barrel in today’s money. “If we take the hypothesis that the current crisis with Iran leads to a worse crisis and that there’s military action of some sort, oil prices could very easily go up to $100,” said Francis Perrin, the editor of industry magazine Arab Oil and Gas.
“Oil prices are going to continue to rise because even if we don’t get into catastrophic scenarios, Iran remains a worrying factor.” Traders also believe further increases in the long term are likely in any event due to booming demand for oil in emerging economies such as China and India at a time when supplies are becoming tighter. Tensions over Iran come at a time of strong demand for energy. The Organization of Petroleum Exporting Countries said yesterday that global oil demand grew by almost one million barrels per day in 2005.
London’s Brent contract has been striking record highs since April 10 on market concerns that the United States might launch strikes at uranium enrichment facilities in Iran.
Market participants also remain anxious over Nigeria, Africa’s biggest exporter of crude, whose total crude production has been slashed by some 20 percent by rebel attacks on energy installations in the southern Niger Delta.