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Oil Hits Record Over $78

From The New York Times

SYDNEY (Reuters) – Oil prices surged to record highs above $78 on Friday as global geopolitical storm clouds gathered, with supply disruption in OPEC exporter Nigeria and tensions across the Middle East driving crude into unchartered territory.

U.S. crude for August (CLQ6) surged $1.40 to $78.10 a barrel by 0147 GMT, after hitting a record $78.40 as gains came on top of Thursday’s $1.75 rally. London Brent (LCOc1) was $1.01 up at $77.70, also touching a record after Thursday’s $2.30 jump.

Escalating conflict between Israel and Lebanon and fresh supply fears in the world’s eighth-largest exporter, Nigeria, took center stage, firing prices 1.8 percent above Thursday’s close and over $80 a barrel for fourth-quarter delivery contracts.

Iran’s nuclear stand-off with the West limped back to the U.N. Security Council, North Korea stormed out of talks with South Korea, and falling crude stocks in the world’s top oil consumer, the United States, continued to bolster prices.

“Oil is being hit from all fronts by geopolitical problems,” said Mark Pervan, a resources analyst at Daiwa Securities. “A raft of problems could keep prices at record levels for some time.”

Iranian President Mahmoud Ahmadinejad on Thursday warned that any Israeli strike on Syria would be considered an attack on the whole Islamic world that would provoke “a fierce response.”

Israeli jets struck Hizbollah’s southern Beirut stronghold on Friday, a day after blockading Lebanese ports and bombing Beirut’s airport in reprisals against the Lebanese guerrilla group’s capture of two Israeli soldiers.

Neither Israel nor Lebanon are oil producers but both lie at the heart of the Middle East, which collectively pumps nearly a third of global output, leaving oil traders very nervous.

“Israel has flared up badly this week, but it’s tension which has been brewing for years,” said Daiwa’s Pervan. “Then there’s Nigeria, where instability is endemic, politics is in turmoil and it’s unlikely to change before elections next year.”

In Nigeria, two suspected explosions at a crude pipeline operated by Agip, a unit of Italy’s Eni, caused oil spills, Nigerian officials said. Eni denied reports of sabotage and extensive oil spills and said the damage would be repaired soon.

It spells fresh uncertainty in Nigeria after Royal Dutch Shell has already shut down 473,000 barrels per day of supply, almost a quarter of output in Africa’s top oil supplier, due to attacks by rebel militants.


Oil in New York is up around 28 percent in 2006, rallying from below $20 in January 2002 amid rising demand led by the United States and the second-largest oil consumer China, together with a series of real or potential supply disruptions.

Iranian President Mahmoud Ahmadinejad said the world’s fourth-largest oil exporter would not abandon its right to nuclear technology as Tehran’s case was referred back to the U.N. Security Council after it delayed accepting a package of incentives designed to prevent it developing nuclear weapons.

“With Israel and Nigeria, Iran completes the triumvirate of key tensions supporting prices,” said Daiwa’s Pervan.

Elsewhere, in Asia, North Korea blamed the South for the collapse of their first high-level talks since Pyongyang’s missile tests sparked a regional crisis last week, saying Seoul would “pay a price” for the failure.

Robust U.S. demand in the face of high prices and falling inventories also supported oil’s gain.

“Today’s records are a supply-side story not a demand story,” said Pervan. “But the draw on U.S. stocks was really severe and you can’t underestimate the effect on prices.”

U.S. crude inventories slid 6 million barrels last week as imports fell, a government report said Wednesday, five times the decline forecast in a Reuters poll. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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