LONDON, 20 April 2006 — World oil prices yesterday struck fresh historic peaks above $73 in London and close to $72 in New York. The latest surge came after the US government revealed a further drop in stockpiles of US gasoline, adding to existing tension about a possible conflict between the United States and Iran, the world’s fourth biggest producer of oil.
In London, the price of Brent North Sea crude for June delivery climbed to a new high of $73.34 per barrel. New York’s main contract, light sweet crude for delivery in May, rose to a record high $71.80. At about 1600 GMT Brent stood at $72.84, a rise of 33 cents on Tuesday’s close. New York’s main contract was at $71.25, down 10 cents.
Adjusted for inflation, current oil prices remain below levels reached after the 1979 Iranian revolution. According to Barclays Capital, in November 1979 crude prices surged to a high of $87.23 per barrel in today’s money.
News of falling US gasoline (petrol) inventories meanwhile fueled market jitters ahead of the peak-demand US summer driving season, and added to heightened concerns over Iran’s disputed nuclear ambitions.
The US Department of Energy revealed yesterday that US gasoline stockpiles sank by 5.4 million barrels last week — twice as much as analysts had expected.
Barclays Capital analyst Kevin Norrish said “dwindling inventories have fueled fears of a supply squeeze at the start of summer, just when US gasoline consumption peaks.”
He added: “Geopolitical concerns and particularly the worsening of the dispute between Iran and Western countries over Iran’s nuclear program remains a major driver behind soaring oil prices.”
Meanwhile, the International Energy Agency is ready to release oil stocks for years to meet the supply gap if Iran halts exports, but will not use reserves to reduce record high oil prices, the agency’s head said yesterday.
Speaking to Reuters television, IEA Executive Director Claude Mandil repeated the agency’s assurances that it would order its members countries to release emergency stocks should there be a supply disruption in Iran. That is what the IEA, an adviser to 26 industrialized countries, did when hurricanes last year cut US Gulf production.
“We did not react to high prices, we reacted to supply disruptions. For the time being, there are high oil prices because of risks of supply disruptions but there is no supply disruption, so we do not need to release stocks,” Mandil said.
“I don’t know what will happen with Iran, but if we have to offset Iranian exports, which are 2.7 million barrels per day, we have kept over 4 billion barrels (of stocks), which can last several years,” Mandil said.
Mandil also agreed with comments from the president of the Organization of the Petroleum Exporting Countries on Tuesday that tough talk from Iran’s opponents over its nuclear program was responsible for record high oil prices.
“We have always said the main cause for high prices were very low spare capacities, which are taken into account by the market when looking at the risks for the future, which are mainly geopolitical,” Mandil said.
