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Crude Oil Rebounds On Iran Jitters

Oil prices had dropped three dollars at the start of the week, falling below 70 dollars on Tuesday.
by Staff Writers
New York (AFP) Aug 30, 2006
Crude oil futures rebounded Wednesday on renewed jitters over Iran a day ahead of a UN deadline for the Islamic state to suspend nuclear enrichment operations or face the threat of sanctions. The market shrugged off stronger-than expected data on US inventories of crude oil and gasoline, which had prompted a downturn in prices early in the day.

New York's main contract, light sweet crude for delivery in October, rose 32 cents to close at 70.03 dollars per barrel.

Immediately following the inventory data, the contract had slumped to 68.85 dollars -- the lowest point since June 21.

In London, Brent North Sea crude for October delivery advanced 32 cents to 70.18 dollars per barrel in closing deals. It had at one point struck 69.15 dollars -- the lowest level since June 22.

Oil prices had dropped three dollars at the start of the week, falling below 70 dollars on Tuesday, mainly owing to expectations that tropical storm Ernesto would not damage US Gulf coast oil facilities.

The US Department of Energy revealed Wednesday that US supplies of crude oil, gasoline and other refined products grew over the past week.

Crude oil stockpiles rose by 2.4 million barrels in the week to August 25 to 332.8 million, the DoE reported. That was a surprise to analysts, who had been forecasting a decline of 1.5 million barrels.

Gasoline, or petrol, supplies increased by 400,000 barrels to 206.2 million, another surprise in view of market expectations of a drop of 600,000 barrels.

But later in the day, traders' attention fell on Iran, the world's fourth biggest producer of crude oil.

The United Nations nuclear watchdog was expected Thursday to confirm that Iran had failed to suspend sensitive nuclear fuel work, opening the door to possible UN sanctions against Tehran.

Analysts say that Iran could disrupt its oil exports if hit by sanctions, a move that could send oil prices soaring.

"The market should now gather some support ahead of the impending UN/Iran deadline," said John Kilduff at Fimat USA.

Additionally, Kilduff said some traders were looking to buy to lock in prices following the recent drop and ahead of the Labor Day weekend in the United States.

"Considering the recent price drop, there will probably be some price adjustment ahead of the Security Council deadline for Iran to end its nuclear program.

"However, with the Council members divided on how to deal with Iran's ultimate refusal, there looks to be more talk than bite to any sanctions that might be imposed."

Iran, meanwhile, has made it clear that it intends to pursue uranium enrichment which it began earlier this year. Enrichment makes fuel for nuclear power reactors but can also produce the raw material for atom bombs.

The Islamic republic rejects US accusations that it is hiding a nuclear weapons drive.

Source: Agence France-Presse

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