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Crude Prices Higher As Iran UN Deadline Nears

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by Staff Writers
New York (AFP) Aug 21, 2006
World crude prices rose Monday after key crude producer Iran said that it would press on with nuclear work despite a UN Security Council resolution calling for a freeze, analysts said. The Security Council has given Iran until the end of this month to halt uranium enrichment -- which makes fuel for nuclear power plants but which can be diverted to make weapons -- or face possible sanctions.

New York's main contract, light sweet crude for delivery in September, closed 1.31 dollars higher at 72.45 dollars per barrel compared with Friday's close.

In London, Brent North Sea crude for october delivery settled up 1.10 dollars at 73.40 dollars per barrel.

"The energy market's focus has shifted from Lebanon to Iran," said Bill o'Grady, an analyst at AG Edwards.

Iran's supreme leader Ayatollah Ali Khamenei said Monday that Tehran will press on with its controversial nuclear work, paving the way for a likely showdown with the top UN body.

"The Islamic republic has made up its mind, and on the nuclear program and other issues it will continue on its path with strength, with God's help," Khamenei was quoted as saying on state television.

His comments came on the eve of a deadline Tuesday for Iran to respond formally to an offer by major powers proposing a package of incentives in return for a suspension of its uranium enrichment.

The United States and some other western states believe Iran is pursuing a nuclear weapon, but Tehran denies this and says its nuclear program is peaceful.

"Tomorrow's deadline for Iran to reply to a package of incentives aimed at getting them to cease nuclear enrichment is front and center as the market's focus," said John Kilduff, an analyst at Fimat USA.

Fears about oPEC member Iran have stoked oil prices because traders fear that a confrontation with the Islamic republic could disrupt its own crude exports and other supplies in the region.

Apparent weekend war games by Iran supported the price gains, o'Grady said.

According to reports on Sunday, Iran fired short-range missiles as part of a massive exercise which began on Saturday with the aim of testing new weapons and tactics.

"Iran has taken a belligerent stance by firing tactical missiles and touting a threat of sending surface-to-sea missiles off to hit oil shipping lanes in the Gulf," said analysts at Dutch banking giant ABN Amro.

"This bravado has sent oil prices higher."

oil traders were also keeping a watch on other developments in the Middle East as a fragile truce between Israel and Hezbollah guerrillas in Lebanon entered its second week on Monday.

Both sides accused the other of violating the ceasefire accord as the United Nations struggled to put together a beefed-up peacekeeping force.

Source: Agence France-Presse

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