MARKET WATCHIran's defiance boosts oil prices

Crude futures prices scrambled above $72/bbl Aug. 21 on the New York market in anticipation that Iran in its scheduled Aug. 22 response would defy United Nations demands to stop enriching uranium.

Aug. 22, 2006

2 min read

Sam Fletcher
Senior Writer

HOUSTON, Aug. 22 -- Crude futures prices scrambled above $72/bbl Aug. 21 on the New York market in anticipation that Iran in its scheduled Aug. 22 response would defy United Nations demands to stop enriching uranium.

Iranian officials repeated earlier this month that they would cut oil exports if the UN applies trade sanctions against that country.

"This delicate political situation will have a dramatic influence upon oil prices," said analysts in the Houston office of Raymond James & Associates Inc. "Many fear that Iran could withhold its oil exports, representing over 2 million b/d, or cut off the Strait of Hormuz, a crucial passageway for crude shipments."

Raymond James analysts said, "The building of Tropical Storm Debby, the fourth tropical depression of this hurricane season, is also playing itself into the oil and gas situation." A tropical depression was in the Atlantic 140 miles southwest of the Cape Verde islands the morning of Aug. 22, moving west-northwest at 17 mph. The weather bureau expects it to become Tropical Storm Debby within a day as its winds strengthen.

In other news, Venezuela's National Assembly is scheduled next week to consider a government proposal for income tax reform that would raise taxes on oil activities and remove a number of tax breaks. "The new directive increases taxes on oil deals from 34% to 50%, effective next January, and eliminates the benefit of previous tax exemptions that comprised 22% of new investments. Natural gas projects will continue to follow the 34% tax regulation," said Raymond James analysts. "This will further hinder and impair prospective and current investment in Venezuelan oil fields."

Energy prices
The September contract for benchmark US sweet, light crudes jumped by $1.31 to $72.45/bbl Aug. 21 on the New York Mercantile Exchange. The October contract gained $1.20 to $73.30/bbl.

On the US spot market, West Texas Intermediate crude at Cushing, Okla., was up by $1.31 to $72.46/bbl. Heating oil for September delivery escalated by 4.32¢ to $2.03/gal on NYMEX. However, unleaded gasoline for the same month fell by 3.03¢ to $1.98/gal. The September natural gas contract lost 10.7¢ to $6.62/MMbtu on NYMEX.

In London, the October IPE contract for North Sea Brent crude climbed by $1.08 to $73.38/bbl. Gas oil for September rose by $11 to $648.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 90¢ to $67.92/bbl

Contact Sam Fletcher at [email protected].