Iran tensions limit oil price falls

AFP
NEW YORK
Petroleumworld.com 01 11 06

World crude prices slipped Tuesday as speculators cashed in profits but tensions over oil heavyweight Iran's nuclear programme kept a floor under the losses, traders said.

Prices had rebounded for much of the day as supply concerns and robust demand had offset milder weather in the United States, the world's biggest consumer of heating fuel.

New York's main contract, light sweet crude for delivery in February, lost 13 cents to close at 63.37 dollars a barrel.

In London, the price of Brent North Sea crude for February delivery fell nine cents to end at 61.92 dollars a barrel.

Oil prices had surged to three-month highs on Monday, hitting 64.61 dollars in New York and 63.21 dollars in London, before profit-taking set in.

Speculative funds have poured into the market in recent weeks, seeking to reap returns on worries over Russian energy supplies and instability in the oil-rich Middle East.

"What I see occurring lately is just traders instigating volatility in the contract," William Edwards of Edwards Energy Consultants in New York said.

"It went up very sharply last week, which probably means it's going to come down very sharply this week," he said.

"There's nothing in reality that is changing and in fact we have a much more comfortable supply situation than we did a year ago."

Investec analyst Bruce Evers said geopolitical tensions had limited the falls.
"People tried to take profits yesterday. Then the Iranian news came out and people got nervous again.

"There is a lot of uncertainty in the Middle East at the moment: (Israeli Prime Minister Ariel) Sharon incapacitated, Iran starting enriching uranium again and the escalation of violence in Iraq."

Iran said Tuesday it was resuming sensitive atomic research, prompting serious concern from Europe and the United States, which suspect OPEC's second-biggest oil exporter of running a secret nuclear arms drive.

"On the one hand you've got all these concerns, and on the other hand, you have extremely mild weather in the US," Evers said. "It is supposed to get very cold in February in the US and Europe."

Weather forecasts indicated the United States would have mild temperatures for much of the rest of the winter, when demand for heating fuel peaks.

Traders were also awaiting Wednesday's weekly snapshot from the Department of Energy for a reading on US energy stockpiles.

Crude futures hit historic high prices in August 2005 following the devastation wrought by Hurricane Katrina on US Gulf Coast energy installations. Crude futures struck 70.85 dollars a barrel in New York and 68.89 dollars in London.

That marked a 70-percent jump between January and August 2005 but prices then pulled back, owing largely to mild weather across the northern hemisphere in the run-up to winter.

AFP 01/10/06

Copyright © 2006 AFP. All rights reserved

 

 

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