NEW YORK: Oil prices spiked to a new record above $147 a barrel Friday, as rising hostilities between the West and Iran and the potential for attacks on Nigerian oil facilities gave investors reason to rush back into the energy markets. Another drop in the US dollar also lured buyers. Light, sweet crude for August delivery soared to an all-time high of $147.27 a barrel on the New York Mercantile Exchange, before pulling back slightly to trade at $146.60, up $4.94. In London, August Brent crude rose to a new trading record of $147.50 before pulling back to trade $4.82 higher at $146.85 a barrel on the ICE Futures exchange. The resurgence in crude prices not only raises the concern that $4-a-gallon ($1.05 a liter) gasoline is here to stay for US drivers -it also means that heating homes could get significantly more expensive this winter. The problem is that while US consumer demand is waning as people try to save money, other factors are keeping energy costs high. Those factors include the weak dollar, refineries cutting back on production and relatively resilient demand for diesel fuel. Diesel is a distillate fuel that is produced and distributed similarly to heating oil, so diesel demand often affects the price of heating oil. The other big reason gasoline and heating bills are likely to stay high: unrest in the Middle East and Africa. The bulls are still able to spin a bullish case on this - not based so much on the fundamentals, but on a lot of What if? scenarios, Schork said. Iran, which has long been under UN scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel. On Thursday, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran. Traders fear the oil producing nation could block the Strait of Hormuz, through which about 40 percent of the world s tanker traffic passes. There s always a fear premium in pricing. The tensions in Iran and the threat of supply disruption will help support oil prices, said Jeff Brown, managing director of FACTS Global Energy in Singapore. Crude had fallen by nearly $10 a barrel over two days at the start of the week, but rebounded by more than $5 a barrel Thursday as anxiety heightened about Middle East and Nigerian supplies being disrupted. The Organization of Petroleum Exporting Countries warned Thursday it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market. -Associated Press Writers Pablo Gorondi in Budapest, Hungary, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
