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| An Iranian
technician works at the Balal offshore oil platform in the Gulf
waters in 2004. (AFP) |
World oil prices resumed a record-breaking rally, coming within a
whisker of 61 dollars, after a hardline conservative was voted president
of major crude producer Iran.
New York's main contract, light sweet crude for delivery in August,
climbed 70 cents to close at 60.54 dollars a barrel, a new high. It
earlier reached a record intra-day peak of 60.95 dollars.
In London, the price of Brent North Sea crude oil for delivery in
August ended up 94 cents at a record-high 59.30 dollars a barrel, having
earlier reached 59.59.
The conservative Mahmood Ahmadinejad thrashed the more moderate cleric
Akbar Hashemi Rafsanjani in Iran's presidential election, sending
shockwaves around the world despite his assurances of moderation.
"Although the election of the hardliner was anticipated, it caught some
people by surprise that he did as well as he did," AG Edwards oil analyst
Bill O'Grady said.
Many in the market are afraid that foreign oil companies will now
be shut out of Iran, the second-biggest member of the Organisation
of Petroleum Exporting Countries (OPEC) after Saudi Arabia.
"In the oil fields, the priority will be with domestic constructors,
specialists, investors and workers," Ahmadinejad said.
Foreign firms are currently allowed to take only a
maximum 49-percent stake in oil contracts and an Iranian firm must lead
the consortium
.
"It could be that they want to export less oil to the United States,"
Bache Financial trader Christopher Bellew said following the election
result.
"Also they're talking about continuing with their nuclear programme, so
it raises the tensions in that part of the world. The Americans certainly
won't be happy with this new regime."
The United States, the world's biggest oil consumer, has accused Iran
of being the world's leading state sponsor of terrorism and has labelled
Tehran part of an "axis of evil".
After eight years of often conciliatory diplomacy, Ahmadinejad on
Sunday abruptly put a stop to any more talk of dialogue with Washington.
"Iran is on a path of progress and elevation, and does not really need
the United States on this path," the former Tehran mayor told his first
news conference since winning the presidency.
His victory reinvigorated fears that dominated oil trading last week of
supply shortfalls come the northern hemisphere winter, when demand for
heating oil will peak.
"People are getting more and more concerned about the second half (of
the year)," Investec analyst Bruce Evers said.
"OPEC is going to be very stretched in the fourth quarter to meet
demand. I think we could see 65 dollars, 70 dollars quite quickly," he
said.
O'Grady, however, said prices can only go so high before economic
reality bites. "Higher oil prices should bring at some point some economic
weakness," which would hit demand for crude, he said.
The developments in Iran overshadowed reassuring noises from OPEC's
president, Kuwaiti Energy Minister Sheikh Ahmad Fahd al-Sabah.
He said he was still discussing with the cartel's ministers the
possibility of raising output by 500,000 barrels per day to stabilise
prices.
"If we find there is a shortage in the market I think they will approve
releasing the 500,000. I think this week we will reach a solution," he
told reporters.
Other analysts noted that US crude oil inventories, a key gauge for
market sentiment released every Wednesday, are nearly 10 percent above
year-ago levels, which would suggest that supplies are plentiful.
Tim Evans, a senior analyst at IFR Markets, said "the (price) bubble
can pop at any point here from simply exhaustion".
Overall, "the market really only has to come back to its senses", he
said.
(Agencies) | 
Updated: 2005-06-28 10:22
