Oil surges to record $78 on ME tension

LONDON — Oil yesterday surged to record highs above $78 on fears the conflict between Israel and Hezbollah could escalate and spread to more Middle East countries.

By (Agencies)

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Published: Sat 15 Jul 2006, 10:45 AM

Last updated: Sat 4 Apr 2015, 3:10 PM

Iran’s nuclear standoff with the West, fears over oil supply in Nigeria due to militant attacks, an influx of fund buying and falling US crude supplies also contributed to the rise in the oil market — which is up nearly 30 per cent this year.

US crude soared to as high as $78.40 a barrel in intraday trading. By 1545GMT, the August contract was at $77, up 30 cents.

London Brent was 26 cents higher at $76.95, after jumping to a record of $78.03 a barrel earlier in the session.

Opec concerned: The Organisation of Petroleum Exporting Countries (Opec) yesterday said it is concerned by the record high oil prices of recent days and expressed its commitment to “order and stability” in the oil market. The price of Opec crude reached a record new price of $70.38 per barrel on Thursday. Prices increased “in spite of the fact that the market remains well-supplied” with crude volumes continuing to enter the market well in excess of demand, the Opec secretariat said in Vienna. “Geopolitical developments, over which Opec has no influence, have been behind this sudden rise in volatility,” the statement said.

Eyes on $80 oil: Illustrating the market’s sustained strength, prices for oil futures contracts to be delivered further ahead were trading above $80, from December 2006 to August 2007.

Oil prices averaged $67.67 so far this year, but were still a long way from the inflation adjusted $87.65 average of 1980, the second oil shock that followed the 1979 Iranian revolution.

Some experts cautioned that prices could just as easily fall should tensions ease, especially as much of the money that had been invested was speculative.

“There’s a lot of new financial investment coming into the market,” said Michael Wittner of Calyon investment bank. “Some of that will be hot money, so profit-taking could take us below $75 in a heartbeat.”

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