CRUDE oil rose to a record above US$143 a barrel yesterday on speculation the dispute over Iran's nuclear program may disrupt supply from OPEC's second-largest producer.
Pressure on Iran to end its uranium enrichment program and the falling value of the United States dollar may drive price up to US$170 a barrel, OPEC President Chakib Khelil said on Saturday.
Oil is headed for its biggest six-month gain since 1999 as investors shun equities for commodities, looking for a hedge against a weaker dollar and the quickening inflation.
"It is a risk Iran will take any measures to cut flows through that important region and the market is reacting to that," said Andy Sommer, an analyst with HSH Nordbank in Hamburg. "There are some funds flowing from the equities side to commodities."
Crude oil for August delivery rose as much as US$3.46, or 2.5 percent, to US$143.67 a barrel in electronic trading on the New York Mercantile Exchange. It was at US$142.67 a barrel at 12:20pm in London.
Brent crude oil for August settlement rose as much as US$3.60, or 2.6 percent, to US$143.91 a barrel on London's ICE Futures Europe Exchange, the highest since trading began in 1988. It was at US$143.06 a barrel at 12:20am in London, reported Bloomberg News.
Foreign ministers from the Group of Eight nations last week suggested more talks to coax Iran into opening its nuclear program to inspectors, after speculation the Islamic republic faces an imminent Israeli strike.
John Bolton, the former US envoy to the United Nations, has said Israel would strike Iran between the US presidential election in November and inauguration in January.
Nigeria's rank among producers in the Organization of Petroleum Exporting Countries has slipped from sixth to seventh behind Angola amid a renewal in militant violence. Chevron Corp, Royal Dutch Shell Plc, and Eni SpA have all shut fields there this month.
"Tensions ratchet up in Iran and troubles continue in Nigeria, drawing funds into the market," Robert Montefusco, a broker at Sucden (UK) Ltd in London, said before the latest record was reached. "The weak dollar is also helping. The market does not want to break down just yet."
The European Central Bank is expected to raise interest rates a quarter-percentage point to 4.25 percent.
Avoid the American dollar "at all costs," investor Jim Rogers said in Shanghai yesterday. "The best investments in 2008 are commodities and natural resources."