Oil at new record above $143 per barrel

Written by Reuters | London, June 30: | Updated: Jun 30 2008, 21:46pm hrs
Oil rose more than $3 a barrel on Monday to a new record high above $143, propelled by heightened tensions between Israel and Iran over Tehran's nuclear programme.

A fall in the US dollar to three-week lows versus the euro helped boost the market.

US light crude was up $3.33 at $143.54 a barrel by 1040 GMT, after a record high of $143.67 a barrel.

London Brent crude was up $3.50 to $143.81.

"The US dollar is down and there are many high-level geopolitical news items, particularly in the Middle East, that are pushing prices up," said Mark Pervan, a senior commodities analyst at the Australian & New Zealand (ANZ) Bank in Melbourne.

Iran's Revolutionary Guards have said Iran would impose controls on shipping in the Persian Gulf and Strait of Hormuz if it were attacked.

The Strait of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula, accounts for roughly 40 per cent of the world's traded oil flows.

Iran's foreign minister said on Sunday he did not believe Israel was in a position to attack his country over its nuclear programme.

Oil prices have jumped more than 40 per cent this year, extending a six-year rally, in response to Middle East tensions, plus expectations that supply will struggle to keep pace with rising demand from emerging economies such as China and India.

The market is sensitive to any supply disruptions.

A succession of militant attacks on Nigeria's oil facilities that have shut a fifth of the country's output since early 2006 has helped drive the market higher.

A flood of cash from investors moving away from sagging global equity markets into commodities and to hedge against inflation and the weak dollar has also contributed to oil's rise.

While some blame these "speculators" for the market's rapid climb since the start of this year, others say it is more to do with a tigher balance between supply and demand.

Tony Hayward, chief executive of international oil company BP Plc said: "This is a fundamental signal, this is not about speculation."

The market will watch US economic indicators due later on Monday as well as the European Central Bank's interest rates decision on Thursday for further guidance on the US dollar.