Oil price may rise above $75

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Aug 20: Oil may rise above $75 a barrel in the next three months if the dispute over Iran’s nuclear programme causes the country to cut exports, said David Thurtell, head of commodity research at Commonwealth Bank of Australia.

Iran, OPEC’s second-largest producer, restarted work at its uranium processing plant at Isfahan last week. Iran risks UN sanctions and military action against its nuclear facilities, US President George W Bush said on Aug 13. Iran may respond by reducing oil sales, Mr Thurtell said in an Aug 18 report.

“If Iran cuts oil exports by even one million barrels a day, oil will quickly blow through $75 dollars a barrel,” said Mr Thurtell, who predicted on July 15 oil would trade above $65.

“The big risk is tensions over Iran’s nuclear energy programme.” Higher oil prices caused by a cut in exports from Iran, which supplies about 3% of global daily oil demand, may increase inflation in oil importing countries, forcing interest rate rises and damping economic growth.

Oil futures rose to a record $67.10 a barrel on Aug 12, the highest since the contract began trading in 1983, after Iran’s new president Mahmoud Ahmadinejad ordered UN seals removed from nuclear facilities.

Economic growth among members of the Association of Southeast Asian Nations may slow by as much as 1.5% point this year if the price of oil remains above $60 a barrel, said Secretary General Ong Keng Yong. Mr Yong said ASEAN economies may expand as little as 4.5% this year.

Iran’s oil exports collapsed after a 1979 revolution that brought on Saturday Islamic government to power and caused oil prices to double to more than $80 a barrel.

Oil prices may fall if Iran’s dependence on oil exports, worth more than $125 million a day at current prices, forces it to seek a peaceful resolution to the conflict, strategist Tobias Merath said.

Iran exports about 2.5 million barrels of oil a day, according to the US Department of Energy. “An easing of the conflict over Iran’s nuclear policy could quickly push the oil price down,” Mr Merath, a strategist at Credit Suisse in Zurich, said in Aug 17 report.