Sunday, July 27, 2008

Iran feels need to be on the Defensive

Oil price could reach $500 a barrel: Iran

Leading headline in "The Peninsula"-Qatar paper

tehran • Iran’s OPEC governor said world oil prices could reach as high as $500 per barrel in a few years’ time if the US dollar falls further and political tension worsens, an Iranian weekly said.“If the dollar’s value continues to decrease and if the political crisis becomes worse, the oil price would reach up to $500,” Mohammad Ali Khatibi told Shahrvand-e Emrooz in an interview published yesterday. He was asked about predictions that oil prices could reach up to $200 per barrel in the next two or three years.

Oil dropped $2 to a fresh seven-week low on Friday, extending a decline that has knocked more than $24 off crude in two weeks as high fuel prices continue to batter demand. Crude prices reached an all-time peak of $147 earlier this month.

Khatibi also said oil exports from the whole Middle East region would be at risk if the Islamic state came under any military attack over its disputed nuclear programme. “If there is another war in the region, it will not only be Iran’s oil not reaching the market, but rather the oil of the whole region would be cut from the market,” Khatibi said. “In that case, we will not have a price rise. We will have a price explosion.”

Around 40 percent of global oil shipments leave the Gulf through the Strait of Hormuz off Iran’s southern coast and Tehran has threatened to impose controls on shipping there if it is attacked, and warned Gulf neighbours of reprisals if they took part. The United States and Iran are at loggerheads over Tehran’s disputed nuclear work. Washington says it wants a diplomatic solution to the row, but has not ruled out military action if that were to fail. Tehran says its atomic activities are purely peaceful, aimed at generating electricity.

Meanwhile, OPEC President Chakib Khelil said that an easing of tension over Iran rather than a change in supply and demand is the main factor pushing oil prices lower. Khelil added in brief remarks to reporters that world petroleum demand was holding up and the market might remain volatile. He said a recent strengthening of the dollar had also helped pushed prices lower.

“I think the market had to factor in that there that would not be an attack on Iran,” Khelil said, referring to tensions between the United States and Iran over Tehran’s nuclear programme. “I don’t see a fall in demand, I don’t see destruction of demand. Supply is the same, or has increased.”

Fuel consumption in the United States and other industrialised nations has begun to slide, dragging oil down from record peaks over $147 a barrel on July 11. Additional pressure has come as the US dollar extended gains against the yen and the euro, following reports showing an unexpected rise in US durable goods orders and stronger-than-expected US home sales in June and consumer sentiment for July.

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