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Royal Dutch Shell Plc .com: Oil prices soar amid Middle East tensions

From Guardian Unlimited
Staff and agencies
Thursday July 13, 2006

Oil prices today climbed to new highs amid heightened political tensions in the Middle East and renewed disruptions in Nigeria.

Geopolitical concerns pushed the price of crude oil to nearly $76 a barrel. US crude traded 82 cents higher at $75.77 a barrel by lunchtime, after hitting a record $75.89. London Brent was up $1.12 at $75.51, after reaching a record $75.60.

The latest surge in oil prices came as Israel imposed a land, sea and air blockade of Lebanon after bombing dozens of targets including Beirut airport, a television station and villages in the south of the country.

The attacks followed a raid by the Hizbullah guerrilla group yesterday, in which eight Israeli soldiers were killed and two captured.

“Geopolitical tensions have stepped up – we are moving on to a new phase in Iran and Israel,” Mike Wittner, of the investment bank Calyon, told Reuters.

“In the end, geopolitical risk is about a current supply disruption getting worse or a new one happening.”

In other geopolitical concerns weighing on the markets, the Iran nuclear row appeared to be heading to the UN security council, while North Korea walked out of talks with South Korea. A drop in oil inventories in the US also added to worries.

In Nigeria, two suspected explosions at a crude pipeline operated by Agip, a unit of Italy’s Eni, caused oil spills, compounding nervousness among oil traders.

Eni denied reports of sabotage and extensive oil spills and said damage would be repaired soon. Royal Dutch Shell has already had to cut Nigerian production by 473,000 barrels a day, almost a quarter of output in Africa’s leading oil supplier, because of attacks by rebels.

The Qatari oil minister, Abdullah al-Attiyah, blamed speculators for the rise in oil prices, pointing out that there was no shortage of crude oil in world markets.

“The main thing we see is that there is no shortage in the market at all,” he told reporters. “Speculators are using the geopolitical situation to their benefit and we are seeing how the oil prices are reacting.”

Qatar is the smallest producer in Opec. The 11-member group has been powerless to stem oil’s rally as rising world demand has used up much of the group’s reserve production capacity.

Rising US demand is also increasing oil prices. US crude inventories dropped by 6m barrels last week as imports fell, a government report said yesterday.

The drop was five times larger than the 1.2m barrels forecast among analysts. US motorists, who use more than 40% of the world’s petrol, bought 1.7% more fuel in the past four weeks compared with a year ago.

The data covered the Independence Day holiday weekend when annual oil demand peaks.

Most analysts thought the spurt in oil prices was likely to be short-lived. Share movements driven by geopolitical events have tended to reverse quickly over the past few years.

“Usually these things tend to calm down again,” said Andreas Utermann, the global chief investment officer of Allianz Global Investors, adding that the danger for investors was if some unexpected crisis hit and then deteriorated.”

Stock markets around the world fell sharply in May and June as it became clear that US central banks were gearing themselves up for higher interest rates.

The US Federal Reserve is poised for its 18th consecutive rise while the European Central Bank and Bank of Japan have also embarked on monetary tightening campaigns. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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