Search

Oil prices rise past $143 as US oil supplies fall

By ADAM SCHRECK,AP Business Writer AP - Thursday, July 3

NEW YORK - Oil prices shot back past $143 a barrel Wednesday as the government reported a bigger-than-expected drop in U.S. crude stockpiles and the threat of a conflict with Iran left traders jittery.

Light, sweet crude for August delivery rose as high as $143.27 on the New York Mercantile Exchange before easing somewhat to trade at $142.95, up $1.98.

The Energy Department's Energy Information Administration said crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts predicted.

However, that same report offered a mixed picture of energy use by the world's thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide _ suggesting that record fuel prices are leading to a real shift in Americans' driving habits.

Prices at the pump hit a new high ahead of the July 4 holiday weekend, jumping half a penny overnight to a new national record of $4.092 a gallon on average, according to AAA, the Oil Price Information Service and Wright Express.

Still, energy traders chose to focus on the crude oil numbers.

"The main feature was the drop in crude stocks," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

Ongoing rhetoric about possible attacks on Iran also continued to unnerve the market.

Iran's oil minister warned Wednesday that an attack on his country would provoke a fierce response. Minister Gholam Hossein Nozari said, however, that Tehran would not cut oil deliveries and would continue supplying the market even if struck by Israel or the United States.

Iran is the world's fourth-largest oil producer and OPEC's second-largest exporter, and borders the strategically vital Strait of Hormuz, a narrow choke-point at the mouth of the Persian Gulf.

Over the weekend, the commander of Iran's Revolutionary Guards warned that Tehran would respond to an attack by barraging Israel with missiles and could seize control of the strait.

But a senior U.S. military commander said Wednesday Washington would not allow Iran to block passage through the strait, a route used by about 40 percent of the world's oil export tanker traffic.

"We will not allow Iran to close it," Vice Adm. Kevin Cosgriff, commander of the 5th Fleet told reporters after talks with naval commanders of Gulf countries in the United Arab Emirates capital of Abu Dhabi. The 5th Fleet is based in Bahrain, across the Gulf from Iran.

Meanwhile, Iran's foreign minister dismissed the threat of an attack against his country in an interview with The Associated Press in New York.

Manouchehr Mottaki said he does not believe Israel or the United States would "resort to such craziness" while the economy is suffering and the U.S. is bogged down in wars in Afghanistan and Iraq. Israel, he added, "is facing a political breakdown within itself and within the region."

The saber-rattling has left energy traders on edge as they try to ascertain the likelihood of a Middle East flare-up and the effect it could have on the world's already tight supply of oil.

Antoine Halff, an analyst at Newedge USA LLC, said that even "the worst case scenario of military strikes against Iran" might disrupt energy supplies less than the market fears.

"In the meantime, though, market perceptions of Iranian supply risks are likely to keep rising over the next few months and cause knee-jerk price flare-ups in response to ostensibly bullish headlines," he said in a research note.

Separately, the Nymex said it was raising the margins on crude oil and related futures contracts, effectively requiring traders to post a larger amount of money to trade the commodity.

Ritterbusch said the increases were routine for the exchange, and are typically meant to account for increased prices and volatility in the market.

In other Nymex trading, heating oil futures rose 11.29 cents to $4.0564 a gallon, while gasoline futures rose 0.89 cent to $3.5223 a gallon. Natural gas futures gained 2.3 cents to $13.528 per 1,000 cubic feet.

In London, Brent crude futures rose $2.79 cents to settle at $143.46 on the ICE Futures exchange.

___

Associated Press Writer John Heilprin in New York and Pablo Gorondi in Budapest, Hungary, contributed to this report.

Recommend this article

Average (0 votes)
0 stars
Sign in to recommend this article »
Most Recommended Stories »

Related Articles: Business