Reuters: Oil rose to almost $75 a barrel on Wednesday, near record highs as mounting tension over Iran’s nuclear plan compounded worries of global supply disruptions amid forecast of falling fuel stocks in the United States.
By Felicia Loo
SINGAPORE (Reuters) – Oil rose to almost $75 a barrel on Wednesday, near record highs as mounting tension over Iran’s nuclear plan compounded worries of global supply disruptions amid forecast of falling fuel stocks in the United States.
U.S. light, sweet crude
“The Iranian situation is increasing the geopolitical risk premium that the market builds into the price of oil,” said Dariusz Kowalczyk of CFC Securities in Hong Kong.
Prices have soared nearly $5 over the past four days, amid a fresh surge of fund investment that has also lifted gold to a 25-year high on a weak dollar, and platinum to a record. The current strong global oil prices are described as unsustainably high by Asian Development Bank President Haruhiko Kuroda.
Dealers will focus later in the day on U.S. weekly fuel inventory data expected to show a ninth-successive decline
Iran, which issued a threat on Tuesday to attack Israel in response to any “evil” act by the U.S., said it had succeeded in purifying uranium to 4.8 percent, at the top end of the 3 to 5 percent range used in nuclear power plants.
The world’s fourth-ranked crude oil exporter, which has used a test cascade of 164 centrifuges to enrich uranium so far and is building two similar cascades, says it will start installing 3,000 centrifuges later this year. This could yield enough material for one bomb within a year.
The U.S. and Israel have vowed to stem Iranian nuclear enrichment and Washington has not ruled out military action if diplomacy fails. Iran’s deputy oil minister said on Tuesday that he was worried about the possibility of an attack.
“We have announced that wherever America does something evil, the first place that we target will be Israel,” a senior Revolutionary Guards commander, Rear Admiral Mohammad-Ebrahim Dehqani, was quoted by ISNA news agency as saying on Tuesday.
U.N. ambassadors from the U.S., Britain and France will set a Security Council resolution this week to make Iran comply with demands to halt enrichment.
“The events seem to be moving into a confrontation and the market is afraid what it will do to supply,” Kowalczyk said.
Adding to the market strain, a quarter of Nigeria’s exports remain halted due to militant violence while Bolivia’s move to nationalize its energy sector has alarmed foreign investors and could inspire similar moves by other South American countries.
Fears that the U.S. could be short of gasoline supplies added to the worries, with the peak driving demand season due to start in three and a half weeks.
“While surging high imports likely allowed total U.S. gasoline stockpiles to start rebuilding in the week ended April 28, it may take time for depleted East Coast stocks to reach desired levels ahead of the peak summer driving months,” said Antoine Halff from Fimat in New York.
Gasoline stocks probably fell by 700,000 barrels last week, alongside a fall of 100,000 barrels in crude inventories and a 100,000-barrel drawdown in distillates, a Reuters poll found.
The market was also concerned whether regular supplier Northwest Europe could sufficiently cover gasoline exports to the U.S., after the giant refinery complex run by Italian energy group ERG
The shutdown, triggered by a fire on Sunday, removed a total of 400,000 barrels of daily crude distillation capacity due to planned maintenance at the larger of the two Priolo refineries.