Israeli attack fears lift crude prices

By Alexander Kwiatkowski  |   2008-7-12  |     NEWSPAPER EDITION

CRUDE oil has risen more than US$5 to a record on concerns that Israel may be preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies.

Oil rallied to a record high of US$146.90 a barrel in New York after the Jerusalem Post said Israeli war planes practiced over Iraq, adding to speculation the country is preparing to attack Iran. A Brazilian union said it plans a five-day strike on platforms that pump 80 percent of the country's crude and Nigerian militants pledged to renew attacks on oil facilities.

"We are now in uncharted territory here with the Iranian situation," said Tom James, head of commodities trading at Liquid Capital Markets Ltd. "People are just too scared to sell."

Crude oil for August delivery rose as much as US$5.25, or 3.7 percent, to an all-time high of US$146.90 a barrel on the New York Mercantile Exchange and was trading at US$146.59 in London.

Israeli war planes are conducting maneuvers in Iraqi airspace and using United States air bases in the country, possibly practicing for a strike against Iran, the newspaper reported, citing comments by Iraqi officials in local media. Israeli government spokesman Mark Regev denied the report.

Iran, OPEC's second-biggest producer, this week tested missiles capable of reaching Israel.

Brent crude oil for August settlement rose as much as US$5.22 a barrel, or 3.7 percent, to US$147.25 a barrel and was trading at US$146.94 on London's ICE Futures Europe exchange. On Thursday, the contract gained US$5.45, or 4 percent, to US$142.03 a barrel. Prices climbed to a record US$146.69 on July 3.

Oil may rise next week because of threats to supply from Iran and Nigeria and falling stockpiles in the US, the biggest energy-consuming country, according to a Bloomberg News survey.

Gasoline prices in the US rose to a record. Futures for August delivery rose as much as 10.46 cents, or 3 percent, to US$3.6155 a gallon on Nymex.

The average price of gasoline at the pump in the US was US$4.11 a gallon on Tuesday, according to AAA, 38 percent higher than a year earlier.

About 4,500 employees of state-controlled Petroleo Brasileiro SA will take part in a protest on platforms in the offshore Campos basin to get full pay for the day they return to the mainland after a 14-day shift at sea, a union official said.

The standoff has led to concern that Iran may come under attack from the US or Israel, disrupting exports from OPEC's second-biggest producer.