Crude-oil prices broke through US$75 a barrel to hit a new record on Friday, fueled by concerns about Iran's nuclear ambitions and tight US gasoline supplies.
Crude prices, which are more than 40 percent higher than a year ago, have risen 8.4 percent from Thursday's closing price -- the biggest weeklong jump since the week ended June 17 last year, when crude futures rose 9 percent.
Analysts say oil prices are likely to climb even higher in the weeks ahead as worries grow about how international pressure on Iran, OPEC's No. 2 oil producer, will affect its crude output. Rebel disruptions of oil production in Nigeria, the fifth-biggest source of US oil imports, also pose a risk to supply.
PHOTO: AP
"You put all these headlines together, you see the situation is getting charged up and getting out of control. That's why oil traders and speculators are having a field day -- this is exactly the kind of environment that speculators want to operate in," Oppenheimer & Co oil analyst Fadel Gheit said.
Light, sweet crude for June delivery rose US$1.48 to settle at a record US$75.17 a barrel on Friday on the New York Mercantile Exchange, after peaking at an all-time trading high of US$75.35. The May contract, which expired on Thursday, had settled at US$71.95 on Thursday.
Accounting for inflation, prices are still about 20 percent below the records reached about 25 years ago.
Traders worry that US gasoline supplies may not meet summer demand after seven straight weeks of drops in domestic gasoline stocks, which are now at their lowest level since November.
"There are a lot of people that were disturbed with this week's energy numbers," said Alaron Trading Corp. analyst Phil Flynn, referring to the US inventory figures. "There seems to be a lot of concern that the combination of the geopolitical issues, as well as refining issues, are enough reason not to abandon the long side of this market just yet."
US refineries are performing seasonal maintenance on a greater scale this year, given the destruction wrought by last fall's hurricanes that battered the Gulf Coast. Also, the transition from gasoline additive MTBE, found to be a groundwater pollutant, to ethanol is creating additional fears about an already tight gasoline market.
On Friday afternoon, US Energy Secretary Samuel Bodman said that phasing out MTBE could be complicated, and that there was no simple solution to lowering oil prices.
At this point, there is no peak in sight.
"Everyone's asking, `What's the high? What's the high?' In a runaway bull market, you can't say. But the market will stop climbing when it finally starts to have an impact on the economy and on demand. I don't see it stopping till we reach that point," BNP Paribas commodity futures analyst Tom Bentz said.
So far, demand has not been crimped significantly, encouraging traders to keep buying into the market.
"Demand continues to be relatively strong. Supply remains tight. And the global economy seems to be doing OK. As they say, no harm, no foul," Gheit said, noting that not just oil companies, but also big financial institutions have been making billions of dollars on soaring energy prices.
Brent crude on London's ICE Futures exchange rose US$1.39 to settle at US$74.57 a barrel Friday.
Gasoline futures rose US$0.0232 to settle at US$2.2380 a gallon (US$0.5912 per liter), while heating oil rose US$0.0226 to settle at US$2.0762 a gallon. Natural gas slipped US$0.083 to settle at US$7.981 per 1,000 cubic feet (US$0.2818 per cubic meter).
The US and the UK say if Iran does not comply with the UN Security Council's Friday deadline to stop uranium enrichment, they will seek a resolution that would make the demand compulsory. Iran has consistently resisted calls to abandon its enrichment program.
Oil exports account for half of Iran's GDP, so it is not in the country's own interest to halt supplies, Gheit said. However, if Iran is attacked, they might be left with no choice. "The only weapon they can use is oil," Gheit said.
Meanwhile, in Nigeria, militants exploded a car bomb inside a military base late on Wednesday, in their first major attack since February. This year, the group has cut more than 20 percent of Nigeria's daily oil exports of 2.5 million barrels.
A spokesman for Shell Petroleum Development Co in Nigeria on Friday said that security concerns in the region were preventing the restart of up to a fifth of its oil output and the company was not in a hurry to start up production.
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