Oil reels under triple blow, rises to record $146.90 a barrel

11 July 2008

Oil prices scaling new peaks do no make for anything new nowadays, but the cause behind the latest spike to a record $146.90 a barrel is certainly reason to have several strategists and analysts deeply worried. Crude oil rose more than $5 to a record on concerns that Israel may be preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies.

Oil prices had fallen $10 over two days to start the week and as oil rebounded Friday, Dow Jones industrial average futures fell 62, or 0.61 percent, to 11,155. In London, August Brent crude rose $3.34 to $145.37 a barrel on the ICE Futures exchange.

The latest hike comes on the heels of a news report in Israeli newspaper Jerusalem Post which said Israeli war planes practiced over Iraq, adding to speculation the country is preparing to attack Iran. To add to the problem, a Brazilian union said it plans a five-day strike on platforms that pump 80 per cent of the country's crude and Nigerian militants pledged to renew attacks on oil facilities.

A day after Iran tested a missile capable of reaching Israel, US Secretary of State Condoleezza Rice warned the oil-producing nation that the US would defend its allies. Iran then responded with another missile launch, drawing buyers back to jittery energy markets.

Both the US and Israel have not ruled out a military strike on Iran as a last option if it does not give up uranium enrichment and heed other UN Security Council demands meant to dispel the fear Tehran wants to make nuclear arms.

Israeli warplanes are conducting maneuvers in Iraqi airspace and using American airbases in the country, possibly practicing for a strike against Iran, the controversial report said, citing comments by Iraqi officials in local media. Israeli government spokesman Mark Regev denied the report.