LONDON, 8 July 2006 — Oil hit a record high of $75.78 a barrel yesterday, boosted by strong demand in the United States and global tension ranging from Iran’s nuclear work to North Korea’s missile tests.
US gasoline demand gained by 1.4 percent in the last four weeks from a year ago, a government report said on Thursday. Data released yesterday showed jobless figures stayed at a five-year low in June, underscoring the strength of the economy.
“While the global economy is staying strong, demand is going to be very supportive,” said Tony Dolphin of Henderson Global Investors, which manages more than 67 billion pounds. “I don’t see oil falling back a lot. I think it is likely to remain in a range and perhaps gradually drift higher.”
US crude was up 16 cents at $75.30, having earlier hit an all-time high of $75.78. London Brent crude rose 59 cents at $74.67, having earlier hit a record $75.09.
Oil in New York is up 23 percent this year because of supply cuts in Nigeria, the dispute over Iran’s nuclear program and a flood of investment fund money into commodities.
“Nigeria, Iran, Iraq, and now North Korea continue to ensure that the markets remain supported by geopolitical factors,” analysts at Citigroup said in a report.
Adjusted for inflation, oil is more expensive than at any time since 1980, the year after the Iranian revolution.
Prices slipped on Thursday after the US government report showed a surprise increase in gasoline stocks, only to bounce back on signs of resilient demand in the world’s top consumer.
“In the very near term, it’s hard to see the oil price coming down appreciably,” said David Dugdale of MFC Global Investment Management.
The United States uses 40 percent of the world’s gasoline and a quarter of its crude oil supply.
Rebel attacks in Nigeria have shut almost a quarter of the country’s output and the Iranian nuclear row has raised fears of supply cuts from the world’s fourth-largest exporter.
The European Union said talks with Iran over the country’s nuclear program late on Thursday were constructive and laid the basis for a fuller response by Tehran next week.
“It’s a good start for what we expect will be a positive meeting on July 11,” Cristina Gallach, spokeswoman for EU foreign policy chief Javier Solana said of his two-hour meeting with Iran’s chief nuclear negotiator Ali Larijani.
In Nigeria, the world’s eighth-largest oil exporter, gunmen on Thursday abducted a Dutch man who was working on an unfinished Shell plant. Oil has rallied from below $20 at the start of 2002, driven by rising global demand led by the US and China that has stretched oil producers and refiners.
OPEC, the producer group which pumps more than a third of the world’s oil, has been powerless to stem the surge in prices, blaming a lack of investment in new refineries.
Growing demand and a strain on supply suggest that strong oil prices are here to stay unless a recession leads to a collapse in demand, investors say.
