Oil Tops $70 a Barrel on Fear of Supply Disruption Due to Iran Situation
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Crude oil surged to a record closing price of $70.40 a barrel in New York, and gold jumped the most since the September 11 terrorist attacks, on concern the dispute over Iran’s nuclear program may disrupt oil shipments.
President Ahmadinejad said last week his country had produced enough enriched uranium to fuel a nuclear reactor. America says the program is a front to develop nuclear weapons. Oil and copper also got a boost from speculation that demand for commodities will grow in China, where President Hu said the economy grew 10.2% in the first quarter.
“The Iranian situation is getting no better and any combination of events could lead to a conflagration,” the vice president of energy risk management at Fimat USA Incorporated in New York, Michael Fitzpatrick, said. “China’s GDP is growing at over 10% so demand for oil will stay strong.”
In other markets, gold rose to a 25-year high, silver reached the highest since 1983, and copper jumped to a record for an 11th straight session.The energy-weighted Goldman Sachs Commodity Index rose 8.09, or 1.7%, to 477.3, the highest settlement ever.
Crude oil for May delivery rose $1.08, or 1.6%, to $70.40 a barrel on the New York Mercantile Exchange, the highest close since trading began in 1983. Futures touched $70.45, the highest intraday price since August 31, two days after Katrina struck the U.S. Gulf of Mexico coast. The record intraday price, $70.85, was reached on August 30.
“The Iranian situation appears to be getting worse,” an economist at Wachovia Corporation in Charlotte, N.C., Jason Schenker, said. America has had sanctions on Iran since the Islamic Revolution in 1979.
Iran has expanded its underground nuclear sites in the cities of Isfahan and Natanz, the Washington-based Institute for Science and International Security said, citing recent commercial satellite imagery.
That may be a sign Iran is gearing up to resist U.S. military action. The New Yorker magazine on April 8 said that America may use air strikes and tactical nuclear weapons to destroy Iran’s suspected atomic weapons program, including underground facilities.
Almost a quarter of the world’s oil flows through the Straits of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.
