- The Washington Times - Thursday, July 13, 2006

12:53 p.m.

Oil prices hit a new high above $76 a barrel this morning in a market agitated by escalating violence in the Middle East, the standoff with Iran over its nuclear program and news of explosions on Nigerian pipelines.

“The oil price has become a register of geopolitical tensions and fears,” said Daniel Yergin, who heads Cambridge Energy Research Associates.

Mr. Yergin said the supply-demand fundamentals are improving, with global oil inventories and spare oil-production capacity rising, but clearly not enough to offset the geopolitical unrest.

Light, sweet crude for August delivery shot up $1.30 to $76.25 a barrel on the New York Mercantile Exchange, surpassing the previous high of $75.78 set during trading Friday.

The surge in oil prices rattled stock market investors, sending the Dow Jones Industrial Average sharply lower for the second straight day. Shares of Wal-Mart Stores Inc., the world’s largest retailer, slumped 3 percent on the New York Stock Exchange on concerns that high energy prices are cutting into consumers’ discretionary income.

“The economy took $50 oil in stride,” Mr. Yergin said. “It’s clearly not taking $70 or $75 a barrel in stride. This is a rougher adjustment.”

Adding to market tensions was news that Iran, the Organization of the Petroleum Exporting Countries’ No. 2 supplier, was referred back to the U.N. Security Council yesterday after nuclear talks failed to yield agreements.

In Nigeria, officials said twin explosions hit oil installations belonging to the oil company Agip, a unit of Italy’s Eni SpA, in the volatile southeastern delta region. Officials suspected sabotage in the explosions yesterday along two pipelines in Baleysa state.

Nigerian officials said the oil installations belonged to Italian oil giant Agip. In Rome, however, Agip’s parent company, Eni SpA’s Agip Oil Co., issued a statement denying a report that the blasts had caused a loss of 120,000 barrels of oil a day.

Elsewhere, militants yesterday attacked a boat carrying supplies to Chevron Corp.’s offshore Escravos oil fields, sparking a gun battle that left four Nigerian navy sailors dead, Brig. Gen. Alfred Ilogho said today.

“With little prospect of any good news on Nigeria, Iran and global demand anytime soon, the risks remain on the upside, and the prospect of a move to, and through, $80 per barrel must be very real, very soon,” said Paul J. Harris, head of energy and emissions at Bank of Ireland Global Markets in Dublin, Ireland.

The hurricane season in the Gulf of Mexico could be a catalyst for even more price spikes, Mr. Harris said.

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