It's amazing how sensitive the oil market is.
Oil Rises a 7th Day as Iran Tension Adds to Disruption Concern
By Mark Shenk
March 28 (Bloomberg) -- Crude oil rose for a seventh day, climbing close to $65 a barrel in New York, on concern that Iran's capture of British servicemen may escalate, disrupting shipments from the Middle East.
Oil jumped more than $2 a barrel, after surging $5 in seven minutes late yesterday on speculation the U.K. would mount a rescue attempt. The Middle East is responsible for about a third of the world's oil output. Prices also rose on expectations an Energy Department report today will show that U.S. gasoline inventories fell for a seventh straight week.
``The recent price moves show that geopolitical factors are back front and center,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Sentiment is bullish. Geopolitical tension and tightness in the gasoline market are the twin pillars of this market.''
Crude oil for May delivery rose $1.54, or 2.5 percent, to $64.48 a barrel at 9:45 a.m. on the New York Mercantile Exchange. Prices reached $64.86 during the session. Futures are down 2.4 percent from a year ago.
Prices surged from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $79.67 today's dollars.
``Whenever there is a headline about Iran people prick up their ears,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc., in Englewood, New Jersey. ``If the Iranians release the British, oil should come off quite a bit.''
Strait of Hormuz
Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. Relations between Iran, which sits on the world's second-largest proven reserves, and western governments were already frayed because of the country's nuclear program.
``It is now time to ratchet up the pressure,'' Prime Minister Tony Blair said in Parliament in London today. The capture of the U.K. personnel was ``wrong and completely illegal.''
Vice Admiral Charles Style told reporters in London that Iran's navy ``ambushed'' Britain's boats on the Iraqi side of the Shatt al-Arab waterway. He said GPS navigation data showed the position of Britain's ships and that Iranian officials have given two separate accounts for the location of the vessels.
``It increases people's concerns about how they would behave if they had a nuclear weapon,'' U.K. Foreign Secretary Margaret Beckett said in a statement to Parliament. She said she's considering whether to take the matter to the UN and to European Union foreign ministers meeting this weekend.
The United Nations Security Council on March 24 unanimously backed a resolution freezing the assets of a state-owned Iranian bank and imposing penalties on some military commanders, to push Iran to suspend production of the nuclear fuel. The package toughens sanctions approved in December.
Brent crude oil for May settlement jumped $1.48, or 2.3 percent, to $66.08 a barrel on the London-based ICE Futures exchange. Futures touched $69 a barrel yesterday, the highest intraday price since Sept. 4.