Oil hit a record trading high Friday as tensions with Iran, the possibility of renewed violence in Nigeria and a planned labor strike in Brazil threatened already tight crude supplies.
Light sweet crude for August delivery was up $5.35 to $147 a barrel in electronic trading on the New York Mercantile Exchange. Earlier prices touched a new trading record of $147.27, eclipsing the mark of $145.85 set July 3.
Iran: Oil rallied more than $5 a barrel late Thursday after the oil producing nation of Iran conducted a second missile test in the Persian Gulf Thursday evening, increasing tensions with Israel and the West over its nuclear program.
The Iraqi Defense Ministry said Israeli warplanes were allegedly practicing over Iraqi airspace and at U.S. military bases in the region Friday, according to regional news reports.
Sources cited in a major Israeli newspaper said they may be training for a potential strike on nuclear sites within Iran.
If Israel does conduct a military operation over Iran during the weekend, the affect on the oil market could be devastating, said Tom Orr, head of research at Weeded & Co.
"I think you could see crude go up $10 to $15 instantaneously," added Orr.
One of the great fears facing oil investors is the possibility that Iran could blockade the nearby Strait of Hormuz, a key waterway that carries a large percentage of the world's oil traffic.
If Iran were to close the strait "even for a week, that would be disastrous," said Orr.
Nigeria: Unrest in Nigeria, Africa's largest oil producer, has also set investors on edge. The nation's main rebel group threatened to renew attacks after the British expressed support for the country's current government. Militants have commonly targeted Nigeria's oil infrastructure.
Brazil: Also adding to concerns was a potential labor strike against Brazilian oil company Petroleo Brasileiro. Brazil's Oil Workers Confederation said it was planning a 5-day strike that could affect 80% of the South American country's oil supply.
Through the beginning of the week, oil dropped more than $10 a barrel after tensions with Iran subsided over the July 4 holiday weekend and the Nigerian rebels maintained an uneasy cease-fire.
But now all those problems seem to be resurfacing at the same time, said Phil Flynn, senior market analyst with Alaron trading in Chicago.
Investors are afraid that "with all of these problems, more than likely something is bound to boil over," said Flynn. He said they don't want to get caught betting against oil if they can help it.
And still lurking at the back of everyone's mind is the value of the dollar, which lost ground against the 15-nation euro.
Gasoline prices slip again
Sizing up Iran's oil threat
Awash in oil money, and problems
1 comment:
Oil is heading higher long term.
Post a Comment