Asia-Pacific

Fears drive oil price up above $74

(Reuters)
Updated: 2006-04-20 16:54

SINGAPORE - Brent crude oil jumped to a fresh record high above $74 a barrel on Thursday after a steep drop in U.S. gasoline stocks fuelled fears of tight summer supplies at a time of growing anxiety over Iran's exports.

Oil traders at the New York Mercantile Exchange. World oil prices reached new historic peaks, above 74.0 dollars in London and 72.0 dollars in New York, owing to mounting tensions over Iran's nuclear programme and fears of gasoline shortages in the United States. [AFP]

IPE Brent crude climbed as high as $74.22 a barrel, its eighth consecutive session to mark a new peak. It was trading up 20 cents at $73.95 a barrel by 0822 GMT.

U.S. May crude oil futures rose 32 cents to $72.49 a barrel, its third day running to make a new all-time high.

Prices extended this month's blistering run after the U.S. government reported a larger-than-expected decline in weekly gasoline inventories of over 5 million barrels, a seventh draw that put them nearly 5 percent below last year's level.

"The dwindling stock levels for gasoline is a serious concern, especially... with the U.S. driving season ahead of us," said Tony Nunan, manager of the risk management business at Mitsubishi Corp. in Tokyo.

Stocks fell as imports thinned and demand for motor gasoline averaged over 9.1 million barrels per day (bpd), 0.8 percent more than a year earlier, the U.S. Energy Information Administration (EIA) said.

The data also showed an unexpected 800,000-barrel draw in crude oil stocks, while distillates fell 2.8 million barrels but remained ahead of year-earlier levels. 

"Healthy crude oil inventories have been keeping a lid on oil from rising further, but if we continue to see a drawdown in stock levels, that lid could come off," Nunan said.

Oil prices have tripled since 2002 and analysts see few signs of flagging as levels push closer to the early-1980s, inflation-adjusted peak of more than $80 a barrel, setting alarm bells ringing in consuming nations.

IRAN DEFIANT

Tensions between Iran and the West over its resolve to expand its nuclear programme kept prices on the boil as analysts fear the dispute could escalate, disrupting shipments from the world's fourth-largest oil exporter.

Iranian President Mahmoud Ahmadinejad said oil had not yet reached its "real value" despite the recent price surge, the official IRNA news agency reported late on Wednesday.

The head of the International Energy Agency (IEA), gatekeeper of 4 billion barrels of potential emergency reserves, reiterated on Wednesday that the agency was ready to release oil stocks if Iran stopped exports, but analysts remained anxious.

"Losing Iran supplies will have a massive impact on the market, and there is no way that other Middle East producers are going to be able to make up for that loss," said Hiroyuki Kitakata, director of commodities business at Barclays Capital Japan.

On Wednesday U.S. Secretary of State Condoleezza Rice said the international community agreed Iran could not have a nuclear weapon and was mobilised to respond.

"In order to turn the Iranians back from what has been behaviour that is contrary to all the wishes of the international community, we are prepared to use measures at our disposal -- political, economic, others, to dissuade Iran," Rice said.

The strong rhetoric comes just a day after President George W. Bush refused to rule out nuclear strikes if diplomacy failed to curb Tehran's defiance.

Iran, which pumps close to 5 percent of the world's crude, declared last week it had enriched uranium to a low level and planned to produce it on an industrial scale.

Separately, Venezuela's President Hugo Chavez threatened to blow up the country's oilfields in the event of a U.S. invasion, which he and his supporters from poor neighbourhoods, considers a serious possibility.