LONDON, April 21: Oil rose to a new peak of $75 a barrel on Friday as investment funds snapped up crude futures and tension mounted over Iran’s nuclear intentions. US light oil for June delivery was up $1.31 at $75 a barrel at 1848 GMT while London Brent was up $1.16 to $74.34.
US oil has rallied about $14 this year on supply concerns and as investment funds pour billions of dollars into commodities as they look for high returns among diverse assets.
Funds stepped in again on Friday, fuelling a recovery from early profit-taking.
“It’s turned around, and it seems to be related to the injection of capital that we believe is coming from pension and mutual funds,” said Deborah White of SG CIB Commodities in Paris. “All week it has been like this, a cross-commodities rally.”
Base metals markets also raced to record highs on Friday.
Investment funds were testing how high the oil price would go before demand suffers, Banc of America analyst Richard Savage said.
“We haven’t seen significant demand destruction,” he said. “The key thing here is that high prices are not due to fundamentals. The market is trying to find that break point.”
High prices have yet to halt oil demand growth in the United States or in fast-growing China.
A war of words between Iran and the West over Tehran’s resolve to continue its nuclear programme has triggered concern that oil supplies from the world’s fourth biggest exporter could be disrupted.
The Iranian president said on Friday that Iran should rely on domestically produced gasoline starting in September, a move that would make the country less vulnerable to sanctions.
Members of the Opec were set to meet informally in Qatar on the sidelines of discussions between energy consumers and producers.
But several Opec ministers have said there is little more the group can do to bring down high prices as the cartel is already pumping at near full capacity.
“Opec can deal with issues it can control, but ... we can’t do anything about the politics in the world,” Algerian Oil Minister Chakib Khelil said.
He said oil markets were well supplied and crude inventories were high, so any action to increase output would only be a gesture.
“The market would see through that,” he said. “If we do something, it has to be credible. Why should we hide the truth?”
Opec has been pumping 29.9 million barrels per day so far in April, up 100,000 bpd from March, tanker-tracking consultancy Petrologistics said on Friday.
US Energy Secretary Sam Bodman said on Friday he would not ask Opec to pump more oil, saying he agrees with the cartel’s assessment that the markets are well supplied.—Reuters
