Europe
Oil Rises to a Record $71.60 in New York as Iran Supply Concern
April 18 (Bloomberg) -- Crude oil touched an all-time high of $71.60 a barrel in New York on concern that the standoff over Iran's nuclear program may lead to a cut of exports from the world's fourth-largest producer.
Prices have jumped $10 in less than a month to climb back to the record set after Hurricane Katrina shut refineries, pipelines and offshore production in late August. Insurgent attacks earlier this year in Nigeria and continued fighting in Iraq have left global suppliers straining to meet rising demand.
``If we were to lose Iran's exports of around 2 million barrels a day there's no way we can make up the loss,'' said Frank Verrastro, director of the Center for Strategic and International Studies energy program in Washington. ``There is no spare capacity, so consumers don't want to use their stockpiles.''
Crude oil for May delivery rose 90 cents, or 1.3 percent, to $71.30 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil touched $71.60, the highest since trading began in 1983. Prices are 42 percent higher than a year ago.
Oil prices more than doubled in 1979 after a revolution in Iran slashed the nation's oil exports. By 1981 U.S. refiners were paying an average $35.24 a barrel, according to Energy Department figures, or $78.50 in 2006 dollars.
Futures reached $70.85 a barrel, the previous record, on Aug. 30, the day after Katrina struck production platforms and refineries along the U.S. Gulf of Mexico coast.
``We are missing about 1 million barrels of output,'' Verrastro said. ``Production in the Gulf has yet to recover and the trouble in Nigeria shows no signs of easing.''
Nigeria's Production
Militant attacks in Nigeria, Africa's biggest oil producer, have slashed output this year. OPEC President Edmund Daukoru said today that about 500,000 barrels a day of output, or a fifth of Nigeria's production, remains halted. Production outages have reached more than 630,000 barrels.
In Iraq, violence and instability plagued efforts to increase production. Iraq has the world's third-biggest proved oil reserves.
President George W. Bush, asked whether the U.S. would consider a nuclear strike against Iran, said ``all options are on the table'' in dealing with that country's atomic program, while stressing that diplomacy is still the best course. Bush said he's working with France, Germany and the U.K. on a ``united effort'' to persuade Iran to halt its nuclear activities.
`Latest Technology'
Iran's President Mahmoud Ahmadinejad, who last week announced his country's enrichment of uranium, said his forces will use ``the latest technology'' against enemies. Envoys from the United Nations Security Council's permanent members, and Germany, meet in Moscow today to discuss the dispute over Iran's nuclear research.
The UN's International Atomic Energy Agency on March 8 referred Iran's atomic program to the Security Council after three years of IAEA inspections failed to conclude that Iran's nuclear research is peaceful. In November 2003, the IAEA had already condemned Iran for concealing parts of its nuclear program for 18 years.
``We are in a bull run,'' said Michael Lynch of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Prices will keep rising until inventories are so high that we don't care about Iran, because the Iranian problem will not be resolved anytime soon.''
Stockpiles may rise in the weeks ahead because spot prices are cheaper than futures for oil delivered later in the year, a price difference traders call ``contango.'' Crude oil for June delivery rose $1.12 to $73.10 a barrel, a $1.80 premium over the May contract. The July contract was up 99 cents at $73.93 a barrel.
Storing Oil
``You are getting paid to store crude oil and products,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``Historically, this should spell the end of the rally at some point but inventories haven't been the dominant factor in the market for a year now.''
The Goldman Sachs Commodity Index of 24 commodities rose to a record today as investment funds purchased energy and metals futures because of increased demand. The 11 percent increase in the Goldman Sachs index this year compares with a 3 percent rise in the Standard & Poor's 500 stocks index. Benchmark U.S. Treasuries have lost about 1.6 percent, according to Merrill Lynch & Co. indexes.
``There are a lot of investors moving into the market,'' Kilduff said. ``It's not fair to say it's only speculators, a lot of investors truly see energy as an asset that they want to keep in their portfolios for the long term because of the high returns.''
Global Consumption
The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil, said risks to the world economy pose the biggest threat to growth in demand. Consumption will average 84.5 million barrels a day this year, OPEC said today in a monthly report, unchanged from a month ago. Oil demand will increase 1.7 percent this year, it said.
OPEC raised its estimate for 2006 world economic growth to 4.5 percent in today's report, from 4.4 percent a month ago. It raised its economic growth estimates for the U.S., China and India to 3.3 percent, 9.1 percent and 7.4 percent, respectively, and kept Japan unchanged at 2.6 percent.
``Energy prices largely reflect growth in the global economy, which is the demand side and on the supply side concerns about supply availability,'' Treasury Secretary John Snow said today in Manchester, New Hampshire. ``There's concerns about Nigeria, there's concerns about Chad, there's concerns about Iraq and Iran.''
Brent crude oil for June settlement rose $1.04, or 1.5 percent, to $72.50 a barrel on the London-based ICE Futures exchange. Futures touched $72.64 a barrel, the highest since the contract began trading in 1988.
Gasoline Supplies
Prices also rose on speculation that an Energy Department report tomorrow will show that U.S. gasoline inventories fell for a seventh-straight week. Stockpiles probably declined 2.2 million barrels in the week ended April 14 from 207.9 million the week before, according to the median of forecasts by 12 analysts surveyed by Bloomberg News.
Gasoline for May delivery jumped 5.03 cents, or 2.3 percent, to $2.22 a gallon in New York. Futures touched $2.223, the highest since Sept. 30. Gasoline is up 49 percent in a year.
Lack of spare capacity in oil production and refining are keeping prices high

 prices surged to a new record of over $75.00 a barrel on Tuesday closing at a price of $75.17. In Europe,  rose to $74.59. In less than a month, prices have risen $10, back to the record highs set after Hurricane Katrina caused refineries to shut down in August 2005. Prices are also 42% higher than a year ago.

Political instability in oil-producing countries is seen as a major cause of this rise. The standoff over 's nuclear program has led to strong words being exchanged and a possibility of sanctions being imposed on Iran, the world's fourth largest producer of oil. Violence in  earlier this year has led to a drop the country's production by almost a quarter.  Nigeria is Africa's largest oil exporter and is also a major supplier of gasoline-rich crude oil to the United States, where demand is set to increase as the "driving season" begins next month. 

Edmund Daukoru, the president of OPEC and Nigerian oil minister said on Tuesday, "The current shoot up we are experiencing is as a result of the Iran problems and it's not helped by the flare up between Israel and the Palestinians. But mainly it's the threatening statements being made against Iran as a result of its nuclear program."