Oil Prices Spike as West Speaks of Ultimatum to Iran

A0470252.jpgTEHRAN (FNA)- World oil prices faced a roller coaster ride this week, tumbling on US demand concerns before rocketing higher on resurgent fears about West’s ultimatum to Iran over the latter’s nuclear energy programs, traders said.

Some commodities fell in value as poor US economic growth data reignited concerns about slowing demand for raw materials from the world’s biggest economy.

Oil prices stormed higher Friday after Washington set the weekend as a deadline for key crude producer Iran to reply to an offer of incentives by the western countries for a freeze in its nuclear drive.

“We expect a response this weekend,” Gonzalo Gallegos, a State Department spokesman, told AFP without specifying Saturday or Sunday. In reaction, New York crude leapt as high as $128.60 per barrel and London Brent oil soared as high as 127.94.

Iran on Thursday rejected any deadline to give a final response to a package drawn up by world powers, and said there should be more negotiations to reach a deal.

“The language of deadline-setting is not understandable to us. We gave them our response within a month as we said we would, now they have to reply to us,” Iranian Foreign Minister Manouchehr Mottaki told reporters on Thursday.

Mottaki said Iran and representatives of the major powers had agreed at a July 19 meeting in Geneva to find common ground on both sides’ proposals aimed at ending the five-year standoff over Tehran’s nuclear drive.

“Both sides said that in future meetings they should work on the communalities of both frameworks in a constructive way to reach an agreement that satisfies both sides, otherwise Iran’s constructive activities will take their natural course,” he said.

Tehran’s arch-foe, the United States, insisted on Wednesday that Iran must give an answer on Saturday, warning of consequences of any defiance by the Islamic republic.

But, Washington took back its words on Thursday and denied its previous ultimatum to Tehran that it should present its answer till Saturday or face more sanctions.

“I didn’t count the days. It’s coming up soon,” US State Department spokesman Sean McCormack told reporters Thursday when asked if August 2 was the deadline for Iran to accept or reject the package.

Not only did McCormack omitted mentioning a strict deadline, he also said there was “no indication of that” when asked whether Washington would pull the incentives offer off the table.

Iran is the world’s fourth-largest crude oil producer and tension created by the US-led West over its nuclear program helped push crude prices to record highs above $147 a barrel on July 11.

Oil prices had tumbled on Thursday and earlier Friday after weaker-than-expected US growth figures stoked fresh worries about the outlook for global energy demand.

Oil prices began the week higher, rallying on Monday after militants attacked a Royal Dutch Shell pipeline in Nigeria, leading the Anglo-Dutch energy giant to reduce output.

The market reversed direction on Tuesday after a report that US gasoline consumption fell last week for the 14th week in a row, according to credit card firm Mastercard, AFP reported. But prices rebounded by more than four dollars Wednesday on news of an unexpectedly sharp decline in US motor fuel stockpiles.

The US government’s Department of Energy said that gasoline or petrol inventories dropped by 3.5 million barrels in the week ending July 25, overturning market forecasts for a gain of 400,000 barrels. The news came amid the so-called US driving season – when many Americans hit the roads for their summer holidays pushing up demand for motor fuel.

By Friday, New York’s main oil futures contract, light sweet crude for September delivery rose sharply to $126.76 a barrel, from $124 a week earlier. Brent North Sea crude for September climbed to $126.20 from $125.02.

Precious metals prices were held back by the strengthening US currency, which weighs on demand for dollar-priced goods because they become more expensive for buyers holding weaker currencies.

“Dollar strength and improved US equity sentiment triggered further bouts of speculative selling in commodities,” said metals analyst James Moore at TheBullionDesk.

On the London Bullion Market, gold fell to $912.50 per ounce at Friday’s late fixing from $920.50 a week earlier. Silver firmed to $17.59 per ounce from $17.55.

On the London Platinum and Palladium Market, platinum decreased to $1,675 per ounce at the late fixing on Friday from $1,726. Palladium slipped to $367 per ounce from $383.

Base metals prices were mixed in subdued trade. “Poor economic data reminded the market of the weak underlying demand side fundamentals that might be signaling the end of the commodity boom,” said BaseMetals analyst William Adams.

“Overall the metals seem relatively directionless, which given the summer slowdown is not too surprising, but choppy trading is likely to remain in force.”

By Friday, copper for delivery in three months eased to $7,924 per ton on the London Metal Exchange from $7,930 a week earlier. Three-month aluminum dropped to $2,929 per ton from $2,957.

Three-month lead rose to $2,150 per ton from $2,123. Three-month zinc edged up to $1,850 per ton from $1,825. Three-month tin decreased to $21,525 per ton from $22,449. Three-month nickel rose to $18,750 per ton from $18,299.

Grains and soya prices edged higher. By Friday on the Chicago Board of Trade, maize for September delivery increased to $5.87 per bushel from $5.77 the previous week.

November-dated soybean meal – used in animal feed – firmed to $13.98 from $13.86. Wheat for August delivery was up at $8.00 per bushel from $7.95.

Sugar prices gained ground. By Friday on LIFFE, the price per ton of white sugar for October delivery jumped to 398 pounds from 355.90 pounds the previous week.

On NYBOT, the price of unrefined sugar for October delivery rose to 14.11 US cents per pound from 12.30 cents.

Malaysian rubber prices fell further. On Friday, the Malaysian Rubber Board’s benchmark SMR20 fell to 309.60 US cents per kilogram from 311.40 US cents a week ago.

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