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Oil Prices Set For New Records Beyond 80 Dollars

by Perrine Faye
London (AFP) Jul 06, 2006
The price of crude oil, fresh from striking a new record above 75 dollars in New York on rising tensions over North Korea and Iran, is likely to hurtle beyond 80 dollars per barrel before the end of 2006, according to one London analyst.

World crude prices -- which have doubled in value over the past two years -- could even strike 100 dollars before the end of the year, said Investec analyst Bruce Evers.

New York's main contract, light sweet crude for delivery in August, hit a record 75.40 dollars on Wednesday owing to concerns over the North Korea missile crisis, the Iranian nuclear energy stand-off and the latest US energy report, dealers said.

In London, Brent North Sea crude for August delivery touched 74.22 on both Wednesday and Thursday -- not far from the record 74.97 dollars hit in May.

Brent North Sea crude is the price reference for two-thirds of the world's traded oil according to the IntercontinentalExchange which operates the trading of Brent.

"I am sure we'll see over 80 this year," Evers said.

Crude prices could hit 100 dollars per barrel "if Iran refuses to cooperate with the States and there is a major hurricane over the producing area of the Gulf of Mexico", he added.

At the start of 2005, crude oil stood at around 40 dollars per barrel -- and was just 20 dollars per barrel at the beginning of 2002.

Traders are fearful that this year's Atlantic hurricane season, which began on June 1 and lasts until the end of November, could be another fierce one.

Last year, hurricanes Katrina and Rita devastated oil installations there and sent crude prices surging to then-record levels.

"Potentially we can see a very nasty spike in the oil price," said Evers.

"We're coming into the main hurricane season, you've got Iran being difficult, you've got North Korea refusing to behave itself."

With no shortage of geopolitical hot-spots across the world -- ranging from North Korea and Iran to ongoing instability in oil producers Nigeria and Iraq -- analysts contend that prices could head higher.

According to Barclays Capital Kevin Norrish, strong global oil demand and tight supplies have resulted in recent runaway prices.

"If you are looking for explanation for, and justification of, the latest move up in prices, we do not believe that you have to look much further than these tightening balances," Norrish said.

Participants are focusing on stockpiles of motor fuel in the United States -- the world's biggest energy consumer -- amid the country's ongoing peak-demand driving season.

Crude prices leapt on Wednesday following news that North Korea had fired at least seven test missiles, and after major crude producer Iran postponed crucial talks in Brussels over its nuclear energy crisis.

Although North Korea is not an oil producer, the geopolitical news convinced investment fund managers to plough into the market to seek gains.

"They saw the geopolitical situation develops and they all jumped in," Evers added.

Adjusted for inflation, current oil prices remain below levels reached after the 1979 Iranian revolution.

Source: Agence France-Presse

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