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Oil rises on Iran nuclear concerns

(Agencies)
Updated: 2008-07-28 15:12

SINGAPORE -- Oil prices rebounded Monday in Asia on comments by Iran's president suggesting a significant increase in the country's nuclear program, but worries about the faltering US economy and crude demand continued to weigh on futures.

Light, sweet crude for September delivery rose 13 cents to $123.39 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.

The contract fell $2.23 to settle at $123.26 a barrel on Friday -- oil's lowest point in weeks -- as investors questioned whether crude has cooled enough to reflect a serious deterioration in demand.

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But Iranian President Mahmoud Ahmadinejad's announcement on Saturday that Iran now possesses 6,000 centrifuges raised concerns about an increase in tensions between Western powers and OPEC's second-largest producer over its nuclear program.

The higher number, which is double the 3,000 uranium-enriching machines Iran had previously said it was operating, is certain to further rankle the United States and others who fear Tehran is intent on developing weapons.

"The comments by the Iranian president are a reminder that the Iranian situation remains fluid," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore.

In Nigeria, eight foreign oil workers who were kidnapped at gunpoint by six unidentified men in a speed boat on Saturday were released unharmed hours later, according to a Nigerian military spokesman. The abduction highlighted the risks of operating in the African nation, a major supplier to the US Earlier in the week, Nigerian militants threatened to blow up pipelines in the region within a month.

"These events really remind the market that the geopolitical risks regarding Nigeria and Iran remain," Shum said. "Overall, the market has weakened due to concerns over the faltering US economy and slackening oil demand in the US, but supply side risks will still provide a high floor for pricing."

The magnitude of the sell-off over the past two weeks is stark. Crude has fallen in seven of the last nine sessions, and is down more than 16 percent from its peak above $147 a barrel earlier this month. Still, prices remain about 65 percent higher than at this time last year.

In other Nymex trading, heating oil futures rose 1.68 cents to $3.5397 a gallon while gasoline prices added 0.67 cent to $3.039 a gallon. Natural gas futures added 9.9 cents to $9.183 per 1,000 cubic feet.

In London, Brent crude for September delivery rose 8 cents to $124.70 a barrel on the ICE Futures exchange.