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Oil above $72; Iran to hand over nuclear response

The world’s fourth biggest oil exporter will respond to a nuclear package backed by six nations at 4 p.m. (1230 GMT) in Tehran, a senior Iranian nuclear official said. Iran has already ruled out suspending uranium enrichment, the key demand.

U.S. crude oil CLc1 was up 15 cents at $72.60 a barrel by 1150 GMT, after surging $2.39 in the past two trading days. London Brent crude LCOc1 was up 27 cents at $73.65 a barrel.

“Users of oil are factoring in a higher possibility of supply disruption the longer this nuclear stand-off continues,” said fund manager Ivor Pether, who helps manage about 4 billion pounds ($7.6 billion) in UK equities at Royal London Asset Management, including Shell and BP shares. ”Iran doesn’t feel it needs to concede anything to the West, I don’t think. The dispute will continue to be a point of focus for the market for a long time and is adding a risk premium to prices.”

The United Nations Security Council has demanded that Iran halt its nuclear work by a deadline of Aug. 31. Traders fear a cut to Iran’s crude exports of more than 2 million barrels per day either as a result of punitive sanctions or a decision by Tehran to use oil as a weapon.

“The main risk for the oil market is that we’re closer to a time when Iran’s oil might not be on the market,” said Tobin Gorey of the Commonwealth Bank of Australia.

A report that an Iranian helicopter had fired on a Romanian oil rig before troops boarded it briefly added to market nerves. A source said the incident was linked to a commercial dispute.

Analysts say Iran is calculating any sanctions would start with modest steps, such as travel bans or asset freezes, while Russia, China and many European Union states may be unwilling to join sanctions that would jeopardise export contracts.

“The (oil) industry is desperately short of foreign exchange for investments -- money which can no longer be borrowed,” said Fereidun Fesharaki of consultancy FACTS Inc. in an Iran report.

Iranian concern has driven U.S. oil back up from a dip below $70 on Friday, which came after a ceasefire between Israel and Lebanon helped push prices down from a record $78.40 in July.

Oil prices remain 19 percent up this year on the fear of disruption to Iran’s exports and reduced Nigerian supplies.

Traders are also keeping an eye on the fourth tropical depression of the 2006 Atlantic hurricane season, which formed on Monday in the far-eastern Atlantic and was expected to become Tropical Storm Debby. Last year’s record hurricane season temporarily closed a quarter of U.S. crude and fuel production.

“Iran seems to be the talk of the town at the moment and a tropical depression is building up in the Atlantic,” said Kevin Blemkin, an oil broker at Man Financial.

“With the news that’s around, any dips are probably going to be bought into.”