Oil hits record over $143 on Iran-Israel tensions

 

http://wiredispatch.com/news/?id=233311

 

NEW YORK (Reuters) - Oil prices hit a record high above $143 a barrel Monday as mounting tensions between Iran and Israel stirred supply concerns.

 

U.S. crude was up 65 cents at $140.86 a barrel by 1:30 p.m. EDT, as weak U.S. oil demand pulled prices off a record high $143.67 hit earlier. London Brent crude gained 57 cents to trade at $140.88 a barrel.

 

The U.S. Energy Information Administration revised downward U.S.

April oil demand by 863,000 barrels per day to 19.77 million bpd --

3.9 percent below year-ago levels -- as surging fuel costs erode demand in the world's top consumer.

 

The revision showed April demand was the lowest for the month since April 2002, and came even before prices scaled to new highs in June.

 

"This revision of the U.S. oil demand for April has certainly put pressure on crude futures. This is demand destruction before our very eyes," said Phil Flynn of Alaron Trading. "This is a huge revision, and it happened when (fuel) prices were still lower, so you can expect that there could be more future downgrades in demand data."

 

Crude prices rushed to a fresh high on the weaker dollar and escalating tensions between Iran, a member of the Organization of Petroleum Exporting Countries, and Israel over Tehran's nuclear program.

 

Iran's Revolutionary Guards said Saturday Tehran would impose controls on shipping in the Persian Gulf and Strait of Hormuz, if it were attacked. Roughly 40 percent of the world's traded oil flows though the narrow waterway separating Iran from the Arabian Peninsula.

 

The U.S. Navy's Fifth Fleet said Monday the United States and its allies would not allow Iran to hamper shipping in the Gulf. Iran's foreign minister said Sunday he did not believe Israel was in a position to attack.

 

Tehran's dispute with the West over its nuclear development program has supported oil's steep rise this year, as has an influx of cash from investors seeking to hedge against inflation and the slumping U.S. dollar.

 

Oil prices have jumped nearly seven-fold since 2002 as part of a broader commodities rally sparked by surging demand from emerging economies like China and India.

 

"Demand from the investment side has been boosted by problems in the financial sector as well as a desire for diversification," said Frances Hudson, investment director and strategy and asset manager for Standard Life Investments.

 

"Also, inflation concerns encourage investment in real assets, such as oil and gold."

 

Inflation in the euro zone rose to a record high of 4 percent in June, data showed Monday.

 

Oil prices have risen more than 40 percent this year, extending a six-year rally, in response to the Middle East tensions, plus expectations that supply will struggle to keep pace with rising demand from emerging economies such as China and India.

 

Saudi Oil Minister Ali al-Naimi reiterated his country's position that oil prices were being driven mostly by speculation and said the OPEC kingpin was prepared to supply all the oil its customers needed.

 

The heads of some of the biggest oil companies, gathered at an oil conference in Madrid, said fundamentals, not investor flows, were the main driver of prices.

 

"This is a fundamental signal. This is not about speculation," said Tony Hayward, chief executive of BP Plc. (Reporting by Matthew Robinson, Gene Ramos, Robert Gibbons in New York; Jane Merriman in London; Fayen Wong in Perth; Editing by Walter Bagley)