Bloomberg: Crude oil rose in New York on concern that Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, may face military attacks over its nuclear program, disrupting Middle East supplies.
By Christian Schmollinger
July 1 (Bloomberg) — Crude oil rose in New York on concern that Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, may face military attacks over its nuclear program, disrupting Middle East supplies.
Oil climbed above $141 a barrel after U.S. officials urged tighter sanctions on Iran and a military spokesman vowed to keep supplies moving through the Strait of Hormuz. BP Plc, Europe's second-largest oil company, said it's "very disappointed" that many expatriate TNK-BP Holding staff will have to leave Russia following refusal of work visas.
"We're really in the world of geopolitics right now and don't know what can happen," Edward Meir, a commodity analyst with MF Global Ltd. in Stamford, Connecticut, said in an interview with Bloomberg Television. "Demand is really receding quickly, especially here in the United States. That will make the overall supply demand balance more comfortable."
Crude oil for August delivery rose as much as $1.44, or 1 percent, to $141.44 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $141.06 a barrel at 2:47 p.m. Singapore time.
Yesterday, it touched a record $143.67 before retreating to settle 21 cents lower at $140 a barrel. The price climbed 38 percent between April and June, the biggest quarterly increase in nine years.
"The concerns which have pushed the oil price higher aren't going to dissipate overnight," said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. "We've also had a big increase in oil prices and evidence of some demand adjustment. In that environment I see the price fluctuating quite a bit."
Middle East Oil
The U.S. won't allow Iran to shut the Strait of Hormuz, through which about 40 percent of Middle East oil is shipped, a spokesman for the Fifth Fleet said.
"They will not close it," Lieutenant Nate Christensen said in a telephone interview yesterday from Bahrain, where the fleet is based. "The Strait of Hormuz is vital international waters."
Brent crude oil for August settlement climbed as much as $1.50, or 1.1 percent, to $141.33 a barrel on London's ICE Futures Europe exchange and was trading at $141 at 2:48 p.m. Singapore time. The contract fell 48 cents, or 0.3 percent, to $139.83 a barrel yesterday, after reaching a record $143.91.
"It would be the mother of all geopolitical situations if the Gulf shipping was blocked," said Toby Hassall, a research analyst at Commodity Warrants Australia in Sydney. "As that becomes a more real threat, that leads to a bigger risk premium being built in."
TNK-BP's Chief Executive Officer Robert Dudley, its chief financial officer and a number of executives working for BP's Russian joint venture may be forced to leave Russia by the end of the month after authorities in Moscow refused work permits, the Financial Times reported on its Web site.
"Many of the expatriate staff working in TNK-BP will have to leave Russia and may not be able to return," David Nicholas, a London-based BP spokesman said when contacted by telephone today. "The loss of the staff will definitely damage TNK-BP, its performance and by extension the performance of the Russian oil sector."
The European Central Bank is expected to raise interest rates a quarter-percentage point to 4.25 percent on July 3, according to a survey of economists by Bloomberg News. The dollar has declined 7.3 percent this year against the euro, prompting some investors to buy commodities as a hedge against inflation.
"We're in for another bout of higher prices next week," said MF Global's Meir. "The ECB will raise rates and the dollar will approach the recent lows and that will jump start a lot of these commodities higher."