Oil prices at record levels
Oil prices were hovering around record highs today amid international tensions over Iran’s nuclear programme and disruptions to supply in Nigeria.
Light sweet crude closed at 70.40 US dollars a barrel in New York – 59 cents above the previous record set in August after Hurricane Katrina struck the east coast of the United States.
And the price rose to record levels in London where the cost of Brent crude hit 71.86 US dollars a barrel.
The latest rally came amid growing fears of military action against Iran, which has said it will proceed with plans to enrich uranium despite warnings from the United States, Europe and the United Nations.
It was also driven by the disruption of crude supplies in Nigeria, where more than 500,000 barrels a day of production has been lost due to militant violence.
And in the Gulf of Mexico, more than 300,000 barrels a day remains off the market as a result of last year’s hurricanes.
Oil prices have soared by more than 10 US dollars a barrel over the past four weeks and analysts believe they could rise further.
New York-based oil broker Tom Bentz said: “Where the top is is pretty hard to say at this point.”
ABN Amro broker Lee Fader said the trigger for the latest rally was “heightened fear about military action” against Iran.
“If somehow this got resolved diplomatically that would definitely take a few dollars off,” he said.
However, traders believe further increases in the long term are likely in any event due to booming demand for oil in emerging economies such as China and India at a time when supplies are becoming tighter.
Crude first rose above 70 US dollars a barrel on August 30 in the immediate aftermath of Hurricane Katrina. Prices in New York climbed as high as 70.85 US dollars a barrel during the day before settling back to 69.81 US dollars.
On an inflation-adjusted basis, oil prices would have to rise above 90 US dollars to exceed the highs of a quarter of a century ago when supplies became tight following the revolution in Iran and the Iran-Iraq war.
