Oil price hits almost 74 dollars in London

LONDON, July 3, 2006 (AFP) – The price of oil reached almost 74 dollars per barrel in London trade on Monday, closing in on a historic high owing to supply concerns, dealers said.

Brent North Sea crude for August delivery climbed 56 cents to 73.82 dollars per barrel in electronic trading after touching 73.99 earlier Monday.

London Brent had struck a record high of 74.97 dollars in May on the back of heightened tensions in major oil producer Iran.

Trading in New York crude, meanwhile, was set to resume on Wednesday following Tuesday’s Fourth of July celebrations in the United States.

New York’s main contract, light sweet crude for delivery in August, had closed at 73.93 dollars per barrel on Friday. Its record high stands at 75.35 dollars, which was achieved in April.

"There are several factors which have all caused some new money to come into the market, which we hadn’t really seen for a while, and that’s what driving prices higher," Calyon analyst Mike Wittner said Monday.

He pointed to tight supplies of US motor fuel and persistent concerns over Iran as key factors supporting prices. Ongoing tensions in oil-rich Nigeria and the US hurricane season were cited also by Wittner as reasons behind the high cost of crude.

Last year hurricanes severely damaged energy installations on the US Gulf coast, fuelling oil prices to record highs.

In the absence so far of any major hurricane damage, the market’s main focus remains over the adequacy of US gasoline supplies.

Some 35 million Americans are expected to take to the roadways over the long holiday weekend, putting severe strain on the country’s stocks of gasoline or petrol.

US gasoline stocks are already under pressure amid the ongoing peak-demand driving season, which sees Americans using their cars for summer vacation.

Crude prices are being supported also by events in Iran, the world’s fourth biggest producer of oil.

Iran on Sunday again rejected a deadline to respond to an international offer aimed at resolving a nuclear standoff.

World powers had last Thursday given Iran until mid-July to provide a "clear and substantive response" to an international proposal aimed at resolving the long-running crisis over Iran’s nuclear programme.

The five permanent UN Security Council members — Britain, China, France, Russia and the United States — plus Germany have offered Iran a package of incentives that includes multilateral talks if it agrees to temporarily halt uranium enrichment.

That work is at the centre of fears the hardline regime could acquire nuclear weapons, although Tehran insists the project aims only to provide fuel for nuclear energy. There are concerns also that Iran could disrupt its oil exports if hit by economic sanctions over the dispute.