- The Washington Times - Monday, June 5, 2006

1:24 p.m.

Oil prices rose to $73 a barrel today after Iran’s supreme leader threatened to disrupt the world’s oil supply if the West punishes Tehran over its nuclear program.

Analysts said the market remains well-supplied, and there are signs that global demand growth is weakening.

“What I’ve been hearing from traders is that there is oil available in the market that is not being bought,” said Ann-Louise Huttle, head oil analyst for Wood Mackenzie. “It’s not as if it’s a particularly tight market right now.”

Instead, Ms. Huttle said the high prices and volatility stemmed from concerns about possible disruptions to the flow of oil around the world.

Iran’s supreme leader Ayatollah Ali Khamenei — who has the final say on all state matters — told Western nations in a speech yesterday that “If you make any mistake, definitely shipment of energy from this region will be seriously jeopardized.”

Ayatollah Khamenei said the United States and its allies would be unable to secure oil shipments passing out of the Persian Gulf through the strategic Strait of Hormuz to the Indian Ocean.

Other Iranian officials have repeatedly ruled out using oil as a weapon.

Iran is the world’s fourth-largest oil exporter and the second-largest producer in the Organization of Petroleum Exporting Countries.

Light, sweet crude for July delivery rose 67 cents to $73 a barrel on the New York Mercantile Exchange. Gasoline futures climbed 1.5 cents to $2.21 per gallon.

“The price surge is a knee-jerk reaction to the remarks made by Iran’s supreme leader,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

Oil prices rose last week despite rising U.S. inventories combined with an expected decision by OPEC to leave its output quotas steady at 28 million barrels a day. One contributing factor was the kidnapping of eight foreigners working on a rig off the coast of Nigeria. The workers were released yesterday. Still, the incident in Nigeria reminded traders that the nation’s oil infrastructure is a potential target for militants.

“These geopolitical events support high prices in the near term,” Mr. Shum said.


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