Oil climbs on concerns about tight global supplies, Mideast

Source: Agencies  |   2008-7-2  |     ONLINE EDITION

CRUDE oil futures closed at a new record near US$141 a barrel yesterday on worries about tight supply and mounting tensions in the Middle East.

Light, sweet crude for August delivery rose 97 cents to settle at US$140.97 a barrel on the New York Mercantile Exchange. Prices at one point rose as high as US$143.33, just 34 cents shy of Monday's trading record. In London, Brent crude futures rose 84 cents to settle at US$140.67 on the ICE Futures exchange.

Crude prices resumed their advance as the head of the International Energy Agency said the world is experiencing "the third oil price shock," comparing the effects of today's prices with the oil crises that began with the 1973 Arab oil embargo and the 1979 revolution in Iran.

IEA chief Nobuo Tanaka added that OPEC is pumping oil at record levels and other producers "are working at full throttle." His comments reinforced the IEA's latest prediction that global supplies will remain pinched despite near-record prices and falling demand in the US and Europe.

"Day-to-day market noise can be driven by speculators," Tanaka said. "High oil prices are driven by fundamentals."

Meanwhile, during a visit to Berlin, US Treasury Secretary Henry Paulson said "there don't seem to be any obvious short-term solutions" to soaring oil prices.

Concerns about ongoing tension in the Middle East, a factor that has helped fuel oil's recent rise, continued to weigh on traders' minds Tuesday.

ABC News quoted an unnamed senior Pentagon official as saying there is an "increasing likelihood" that Israel will strike Iran's nuclear facilities before the end of the year. Such an attack could prompt Iran to retaliate, potentially disrupting oil supplies in the strategically vital Persian Gulf.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois, called the report "more of the same" but acknowledged it was having an effect on energy market psychology.