Oil prices jump over Iran tensions

15Jan

Oil prices have jumped on weakeness of the dollar and tensions over oil-rich Iran’s nuclear drive.

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New York’s main futures contract, light sweet crude for delivery in March, was up 2.88 dollars to 77.01 dollars a barrel.

London’s Brent North Sea crude for April delivery rocketed 3.17 dollars to 75.68 dollars a barrel.

In foreign exchange trading on Tuesday, the euro recouped some of its recent losses against the dollar after European Union finance ministers put pressure on Greece to tackle its massive debt problems.

A weaker greenback makes dollar-priced crude cheaper for buyers using stronger currencies, boosting demand.

“A renewed taste for risk seems to have carried investors back into commodity markets,” said Mike Fitzpatrick, vice president of MF Global.

“The rationale perhaps emanates from a sense that European policymakers have gotten the sovereign debt issue under control. Sadly, we see no evidence of this,” he said.

Fitzpatrick said the market remained concerned about how the EU would help Greece dig out of its debt crisis.

“European finance officialdom has turned up the heat on Greece, but for investors, the sum and substance seems to fall on their promises to rescue the nation,” he said.

“Still, they refused to say how they would make good on a promise to rescue the nation if it canGÇÖt contain its debt.”

Crude prices were “supported by a weakening US dollar as the euro strengthened,” said Myrto Sokou, an oil market analyst at Sucden Financial Research in London.

Oil prices were pummeled recently due to a falling euro and China’s latest bid to cool down its booming economy, traders said.

China is the world’s second-biggest oil-consuming nation, after the United States.

“The market had certainly overreacted as the world’s second-largest energy consumer is still going to see a substantial energy demand increase this year and its growth will occur regardless of the government’s attempts to curtail lending,” commodities analyst Andrey Kryuchenkov of Russian investment bank VTB Capital said on Tuesday.

Concerns over Iran’s nuclear drive also affected the market.

Last week, Iran began enriching uranium to 20 percent purity, which Washington and other capitals say adds to evidence it is seeking a nuclear weapon.

Tehran denies the charge, insisting its goal is peaceful nuclear energy and research.

US Secretary of State Hillary Clinton held talks in Saudi Arabia on Monday looking to rally support for tough new UN sanctions against Iran, which she warned is turning into a “military dictatorship” bent on building a nuclear weapon.

“This can only have the result of making Iran, and no doubt the rest of the world, conclude that hostilities are inching closer,” Fitzpatrick said.

The OPEC oil producers’ cartel last week held its forecast for modest growth in world oil demand this year, but warned the slow pace of economic recovery was clouding the outlook.

World oil demand in 2010 was forecast to grow by 0.8 million barrels per day (bpd) to average 85.1 million bpd, predicted the Organization of Petroleum Exporting Countries, whose member countries together pump about 40 percent of the world’s crude.

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