Wellington: Crude oil rose for a seventh day in New York on speculation that a confrontation occurred in the Persian Gulf between US or British forces and Iran, increasing the risk of disruption to supplies from the Middle East.
The US military and State Department officials said they had no information about a naval incident between Iran and the US Oil had surged yesterday as rumours swirled that the UK government had attempted a raid to rescue navy personnel held in Tehran since 23 March, or that Iran had fired on a US vessel in the Gulf.
“It’s an indication of the level of concern people have around the possibility of a military conflict in the Middle East,’’ said Andrew Harrington, commodities analyst at Australia & New Zealand Banking Group Ltd in Sydney. “Even if no tankers are sunk or no infrastructure is blown up, if there are concerns that this could happen the premium will go back into the price very quickly.’’
Crude oil for May delivery rose as much as $1.53 (Rs66.11), or 2.4%, to $64.46 a barrel in electronic after-hours trading on the New York Mercantile Exchange. It was at $63.88 at 9:55 am in Singapore.
The contract settled at $62.93 yesterday, up 2 cents, after earlier falling on reports showing declining US house prices and consumer confidence. Prices jumped $5 in seven minutes just before 5 pm New York time, with five trades done between $68 and $68.09 a barrel, the highest intraday price since 6 September.
“Right now the buyer of those barrels may not be very happy,’’ said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston.
The US Navy yesterday started an exercise in the Gulf involving 15 warships and more than 100 planes. The maneuvers are the largest show of force in the Gulf since the 2003 invasion of Iraq, the Associated Press reported.
There is no US military activity in the Gulf other than the previously scheduled exercises, US Navy Commander Kevin Aandahl, a spokesman for the Fifth Fleet in Bahrain, said yesterday.
“I’ve seen this happen before where there’s a totally unsubstantiated rumour’’ that influences world markets, he said.
Iran has the second-biggest proved oil reserves. Almost a quarter of the world’s oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. The surrounding region, the Middle East, is responsible for almost a third of the world’s oil output.
Oil reached a record $78.40 a barrel on 14 July on concern Israeli’s attack on Iranian-backed Hezbollah militia in Lebanon may spark a wider conflict.
Iranian forces seized 15 Royal Navy sailors and marines in the Gulf on 23 March, alleging they had crossed into its territorial waters while searching merchant vessels.
The dispute over their detention will be solved in a “calm’’ manner, Iran’s foreign Ministry said yesterday without specifying how long it may take. Britain’s efforts will enter a “different phase’’ if negotiations fail, Prime Minister Tony Blair said earlier.
“The issue around these British sailors and marines is not one that the UK government will want to have hanging around on their ‘to-do list’ for too long,’’ ANZ’s Harrington said. “And there’s other clouds on the horizon.’’
Oil prices have gained 10% the past two weeks as the United Nations agreed new sanctions to stop Iran’s nuclear research and gasoline futures surged to a seven-month high as rising US demand and refinery break-downs sapped stockpiles.
An Energy Department report today will probably show US gasoline inventories fell 2 million barrels last week, the seventh straight decline, based on the median estimate from a Bloomberg News survey of 14 analysts.
Gasoline demand peaks during the summer holidays starting on Memorial Day late May and ending Labor Day early September. The North Atlantic hurricane season runs from 1 June through 30 November.
Florida and the Gulf of Mexico, responsible for about 30% of US oil production, are likely to face an increased threat from powerful storms this year, AccuWeather.com said in its initial 2007 hurricane outlook.
“This year’s stronger storms are likely to cause the kind of disruption that will be felt in wallets and pocketbooks,’’ Joe Bastardi, chief forecaster for State College, Pennsylvania- based AccuWeather, said yesterday.