Crude oil rose to a record above $143 a barrel on speculation the dispute over Iran's nuclear program may disrupt supply from OPEC's second largest producer.
Pressure on Iran to end its uranium enrichment program and the falling value of the US dollar may drive prices to $170 a barrel, OPEC President Chakib Khelil said recently. Oil is headed for its biggest six-month gain since 1999 as investors shun equities for commodities, looking for a hedge against a weaker dollar and rising inflation.
"Tensions ratchet up in Iran and troubles continue in Nigeria, drawing funds into the market," Robert Montefusco, a broker at Sucden (UK) Ltd in London, said. "The weak dollar is also helping. The market does not want to break down just yet."
Crude for August delivery rose as much as $3.46, or 2.5 percent, to $143.67 a barrel in electronic trading on the New York Mercantile Exchange. It was at $143.27 a barrel at 11:33 am in London.
Brent crude oil for August settlement rose as much as $3.22, or 2.3 percent, to $143.53 a barrel on London's ICE Futures Europe exchange, the highest since trading began in 1988. It was at $143.46 a barrel at 11:34 am London time.
Foreign ministers from the Group of Eight (G8) nations last week suggested more talks to coax Iran into opening its nuclear program to inspectors, after speculation the Islamic Republic faces an imminent Israeli strike.
John Bolton, former US envoy to the United Nations, has said Israel would strike Iran between the US presidential election in November and inauguration in January.
Nigeria's rank among producers in the Organization of Petroleum Exporting Countries has slipped from sixth to seventh behind Angola amid a renewal in militant violence. Chevron, Royal Dutch Shell and Eni SpA have all shuttered fields there this month.
"The dollar will be getting weaker so that is bringing fresh money into the oil market," said Tetsu Emori, a fund manager with Astmax Ltd, a fund management company in Tokyo. "Oil market sentiment is getting stronger."
The European Central Bank is expected to raise interest rates by a quarter percentage point to 4.25 percent, according to some economists. The dollar has declined 7.3 percent this year against the euro.
Avoid the dollar "at all costs", investor Jim Rogers said in Shanghai yesterday. "The best investments in 2008 are commodities and natural resources. Agricultural prices have much higher to go over the next decade. We have a shortage of everything including seeds."
Hedge fund managers and other large speculators almost doubled their bets on rising prices in the week ended June 24, according to US Commodity Futures Trading commission data.
Net-long positions in New York oil contracts, the difference between contracts to buy and sell the commodity, gained 90.5 percent to 24,217 contracts. Long positions rose from a five-month low a week earlier while contracts to sell oil fell a second week to a two-month low.
Source:China Daily/Agencies
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