Iran and the Price of Crude
Mark Shenk reports:
March 28 (Bloomberg) -- Crude oil surged above $64 a barrel to close at a six-month high in New York on concern that tensions with Iran will escalate, disrupting shipments from the Middle East.
``It is now time to ratchet up the pressure,'' Prime Minister Tony Blair said in Parliament in London today, referring to the capture of 15 U.K. naval personnel. Oil jumped late yesterday on speculation the U.K. would mount a rescue attempt. A report today showed that U.S. crude oil, gasoline, diesel and heating oil supplies declined last week.
``As long as the British naval personnel are held, prices are going to move higher,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The chances of a military incident occurring in the Persian Gulf are high. The volatility that occurred last night is probably a preview of what we will see in the weeks to come.''
``The recent price moves show that geopolitical factors are back front and center,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Sentiment is bullish. Geopolitical tension and tightness in the gasoline market are the twin pillars of this market.''
``The situation isn't getting any better with Iran, there's been a major ratcheting up of tension,'' said Paul Horsnell, head of commodities research for Barclays Capital in London. ``We see Iran as being a major driver of oil prices through 2008.''
Horsnell said he put the finishing touches on an oil forecast of $70 a barrel for Barclays' global outlook last weekend, only to see Brent oil prices surge to $69 a barrel late yesterday, before the report was printed.
``It's ironic and rather frustrating -- what we said would happen already happened,'' Horsnell said. ``We've had a gradual, remorseless push up in price and then $5 in less than 10 minutes.''
An Iranian Foreign Ministry spokesman said his country will release a British female sailor in detention ``within one or two days.'' Seaman Specialist Faye Turney was detained along with 14 other British sailors and Marines on March 23 in the Shatt al- Arab waterway, which separates Iran and Iraq.
The United Nations Security Council on March 24 unanimously backed a resolution freezing the assets of an Iranian bank and imposing penalties on some military commanders, to push Iran to suspend production of nuclear fuel. The package toughens sanctions approved in December.