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Global oil prices hit historic peaks

Taxis queue outside Beijing railway station yesterday. Fares in China's capital are set to rise by 25 percent following a sharp rise in global oil prices, state press reported yesterday. New taxi fares issued by the Beijing Transportation Bureau call for prices to rise from the current 1.6 yuan (US$0.20) per kilometer to 2.0 yuan. PHOTO: AFP

World oil prices reached new historic peaks yesterday, above US$74 in London and US$72 in New York, owing to mounting tensions over Iran's nuclear program and fears of gasoline shortages in the US.

In London, the price of Brent North Sea crude for June delivery struck a record high of US$74.22 per barrel.

New York's benchmark contract for light sweet crude for May delivery hit an all-time peak of US$72.49.

At about 0810 GMT Brent stood at US$74.06, up US$0.33 on Wednesday's close, while New York crude was at US$72.41, up US$0.24.

Dealers said a fall in US gasoline stocks exacerbated tension in an energy market already spooked by the prospect of a conflict in Iran, the world's fourth biggest crude producer, over its alleged program to develop nuclear weapons.

The US Department of Energy had said on Wednesday that US gasoline stockpiles fell 5.4 million barrels last week, twice as much as analysts had expected, ahead of the summer driving season.

US crude oil reserves fell 800,000 barrels in the week to April 14 to 345.2 million barrels, surprising analysts who had been expecting a rise of 2.3 million barrels.

"Besides the fundamental supply and demand information, prices are driven by the emotional momentum of the Iranian issue. The market is nervous because of the recent heated rhetoric from Iran and the US. The rhetoric is causing prices to stay above US$70."

Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore

The fall in gasoline stocks comes ahead of the peak driving season in the US, which sees local drivers take to the roads on vacation beginning in May.

"Besides the fundamental supply and demand information, prices are driven by the emotional momentum of the Iranian issue," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"The market is nervous because of the recent heated rhetoric from Iran and the US. The rhetoric is causing prices to stay above US$70," he said.

World powers who met on Wednesday in Moscow for a second day of talks failed to agree on how to halt Iran's nuclear drive.

Russia and the US remained divided over the imposition of sanctions and possible use of a military strike.

US Secretary of State Condoleezza Rice said on Wednesday that although diplomatic avenues will be fully explored, "we have to contemplate diplomacy failing; I believe we have options at our disposal."

Washington has accused Iran of working secretly to build nuclear weapons under cover of a nuclear energy program it is developing with Russian assistance.

Iran denies this charge and says the program is strictly for producing nuclear energy.

Security analysts have said that in the event of a conflict, Iran could block the Strait of Hormuz, a strategic choke-point for oil exports to Japan, the US and Western Europe.

Brent North Sea, which is a light sweet crude oil, is the price reference for two-thirds of the worlds traded oil, according to the IntercontinentalExchange which operates the trading of Brent.
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