Oil nears $69 as Iran tensions mount
Oil prices shot back towards record levels on Monday amid growing tensions over Iran’s nuclear ambitions after weekend press reports claimed that the US government was studying military options for action.
An article in the New Yorker magazine said US officials were considering the possibility of using nuclear bombs against Iran’s suspected underground nuclear facilities.
Barclays Capital said that although the Bush administration insisted that it was seeking a diplomatic solution to its dispute with Iran, its statement fell short of an outright denial, leaving market fears free to grow.
“Geo-political tensions look capable of bringing about further tests of the $70 a barrel region in the weeks ahead,” said Kevin Norrish, an oil analyst at Barclays Capital. In New York, Nymex West Texas Intermediate rose $1.35 to settle at $68.74 a barrel. IPE Brent for May hit an all-time peak of $68.90, up $1.61, before closing at $68.75, up $1.46.
Crude prices were also supported by aggressive rhetoric from militants in Nigeria who have threatened to kill workers who have returned to oil platforms that were shut by earlier attacks. About 0.5m barrels a day of Nigerian output has been lost because of attacks by militants.
Royal Dutch Shell, operator of about 90 per cent of the lost Nigerian output, said it aimed to restart production in Nigeria soon but the company has declined to return staff to the region until the violence abates.
The increase in global tensions in the oil market helped propel gold higher, with bullion rising to a fresh 25-year high of $598.10 a troy ounce before easing to $592.60/$593.40 by mid-afternoon in New York.
Traders said it appeared to be only a matter of time before gold breached the $600 a troy ounce level.
“Although the outlook remains positive, gold could pause in consolidation below $600, gathering sufficient momentum to break psychological resistance and resuming its inexorable march towards $625,” said analysts at Standard Bank.
Continued speculation about the imminent launch of an exchange traded fund helped push silver to $12.50 a troy ounce, its highest level since August 1983. The metal eased back to settle at $12.38/$12.41 by late afternoon in New York.
Dealers reported that a fresh wave of buying by funds had pushed base metals prices higher. Copper moved to within a whisker of $6,000 a tonne, rising $215 to a record high of $5,940 a tonne after a further fall in LME inventories, which have fallen to critically low levels globally. Zinc jumped $104 to another record of $2,915 a tonne. Aluminium rose $58 to $2,598 a tonne.
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