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THE NEW YORK TIMES: Oil Surges Through $69 on Iran, Nigeria Concerns

Oil Surges Through $69 on Iran, Nigeria Concerns

Published: April 11, 2006

Filed at 1:27 a.m. ET

SYDNEY (Reuters) – Oil surged through $69 on Tuesday, with London Brent crude hitting record-highs, on increased tensions between the United States and Iran over Tehran's nuclear aims and Nigerian supply disruptions.

U.S. May crude (CLc1) traded up 37 cents at $69.11 a barrel by 0523 GMT, an 11-week high, adding to Monday's 2 percent rally to take prices in sight of August's $70.85 record.

Brent crude (LCOc1) traded up 31 cents to $69.06 a barrel, an all-time record for the contract.

Oil has risen more than 13 percent this year, prolonging a rally that began at the start of 2002 with oil at $20 as cash-rich investors inspired by geopolitical tensions buy up commodities. Gold reached its highest since December 1980 on Tuesday.

“Concern about Iran never ceases to push prices,'' said Gerard Burg, minerals and energy economist at the National Australia Bank. “The market is not really factoring in the true impact of military action but the mere mention of it sends prices higher.''

Forward U.S. contracts were trading even higher with crude for delivery during summer months this year above $71 and northern hemisphere winter months at $72 or above.

President Bush said on Monday that force was not necessarily required to thwart Tehran's nuclear ambitions and dismissed reports of plans for military strikes on Iran as ''wild speculation.''

Bush said diplomacy was his focus in the dispute with Iran, in his first comments since weekend reports in the The New Yorker magazine and The Washington Post that the U.S. administration had stepped up military planning.

Washington fears the world's fourth-biggest oil producer is building atomic weapons, but Tehran insists it only wants nuclear technology for power generation.

European foreign ministers began reviewing their options for possible restrictive measures against Iran on Monday, which could include financial sanctions, with France urging Iran to bow to international pressure and suspend nuclear activity.


“Then there's Nigeria, also bubbling along, and no short-term view that things there will resolve themselves,'' said Burg.

Rebels continue to threaten attacks on Nigerian oil output, with about 500,000 barrels per day (bpd) shut in since February in the world's eighth-biggest exporter.

Royal Dutch Shell (RDSa.L), operator of about 90 percent of the lost Nigerian output, said on Monday it had yet to resume output of its smaller offshore EA field, though assessment of the site before any restart could begin as early as this week.

Analysts say its larger onshore Forcados field and terminal is likely to be shut longer.

With the loss of gasoline-rich Nigerian oil set to encroach on the U.S. summer driving season, traders are nervously eyeing falling fuel supplies hit by high demand and extensive refinery maintenance to comply with cleaner U.S. fuel standards.

Analysts polled by Reuters predict U.S. gasoline inventories fell last week by an average 2.2 million barrels, extending a 14.1 million-barrel fall in the previous five weeks to March 31, in U.S. government data to be released on Wednesday.

“With this week's stock announcement likely to show a fresh decline in gasoline, it adds to market fears caused by the switch to greener fuels,'' said National Australia Bank's Burg.

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