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Oil prices fall on easing geopolitical tensions
By Geraldine Ding
AFP
SINGAPORE
Petroleumworld.com 07 11 06
Oil prices were lower in Asian trade Tuesday on hopes for progress on Iran's nuclear program at the upcoming Group of Eight summit and as the market gave back gains sparked by last week's North Korean missile launches, analysts said.
At 2:22 pm (0622 GMT) New York's main contract, light sweet crude for delivery in August, was down 24 cents at 73.37 dollars per barrel from 73.61 dollars in late US trade Monday.
The contract hit a record 75.78 dollars in intraday trade Friday on heightened geopolitical tensions, particularly over Iran and North Korea.
Brent North Sea crude for August was down 27 cents at 72.62 dollars.
"There's a bit more optimism in the oil market this week. Oil prices are falling primarily due to easing geopolitical concerns and before the G8 meeting on the Iranian front," said Victor Shum, an analyst with energy consultancy Purvin and Gertz.
The European Union was expected to press Iran Tuesday for an early response to an offer to defuse its nuclear stand-off with the West but hopes for a breakthrough appeared slim at fresh talks in Brussels.
EU foreign policy chief Javier Solana was to hold new talks with Iran's top nuclear negotiator Ali Larijani, as well as representatives from Britain, France, Germany and Russia.
Solana presented the international offer to Tehran on June 6 on behalf of the five permanent UN Security Council members plus Germany. It combines economic and other incentives in exchange for a pledge to suspend uranium enrichment.
The West, in particular the United States, wants Tehran to respond before the G8 major powers' summit in Saint Petersburg beginning Saturday.
Hardline President Mahmud Ahmadinejad has said Tehran will not respond before August.
Shum said more tough talk, particularly from the Iranians, is unlikely before the G8 meeting.
Easing concerns over the North Korean missile crisis also caused prices to fall, Shum said.
"Earlier, some of the surge in oil prices was caused by the North Korean missile tests. The tests have nothing to do with oil supply or demand, so the concerns were really hyped up and now the market is really correcting," Shum said.
A North Korean delegation left Pyongyang Tuesday for South Korea, going ahead with inter-Korean talks that had become uncertain after the missile tests, an official in Seoul said.
The UN Security Council on Monday put off a vote on a draft resolution that would impose sanctions on North Korea over its tests.
North Korea last week test-fired seven missiles, including for the first time a Taepodong-2 believed able to hit US soil. It fell into the Sea of Japan (East Sea) soon after launch.
Societe Generale analysts forecast that current high crude prices will be followed by "a mere correction", unlike the boom and bust seen by the oil industry in the 1970s and 1980s.
Oil prices, they said, have not yet reached levels high enough to trigger significant changes in consumption or government policies.
"How high is the sky? If hurricanes hit the Gulf Coast again this year, we mya yet find out," Societe Generale said in a reference to the southern US region devastated last year by Hurricane Katrina.
AFP 11 0710 GMT 07 06
Copyright ©2006 AFP. All Rights Reserved.
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