Oil Regains $126 on West’s Ultimatum to Iran

A0419169.jpgTEHRAN (FNA)- Oil rose back above $126 a barrel on Monday on supply worries, lifted by concern over West’s ultimatum to Iran over its nuclear activities, a tropical storm that has formed near the Gulf of Mexico and further violence in OPEC member Nigeria.

Oil and natural gas companies said production from the US Gulf of Mexico has been unaffected by Tropical Storm Eduard, but they were preparing for possible evacuations of workers and temporary output shutdowns.

US light crude for September delivery rose $1.20 to $126.30 by 0433 GMT, gaining for the second consecutive session.

London Brent crude was up 96 cents at $125.14.

“We’ve seen a lot of worries about demand slowing in the past couple of weeks but now it seems like the focus has switched back to supply concerns,” said Gerard Burg, a commodities analyst at National Australia Bank in Melbourne.

The United States said on Sunday that Iran has left the UN Security Council no choice but to increase sanctions on the Islamic republic for ignoring demands that it give up nuclear rights, stirring concerns of a potential confrontation that could disrupt supply.

The US declaration came a day after an informal deadline lapsed for Iran to respond to an offer from the United States, Britain, France, Germany, China and Russia for talks on its disputed nuclear program.

Iran has already stressed that the two sides have not set any deadline for Tehran’s response neither during the talks in Tehran nor in Geneva.

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.

Tehran has not formally responded to the offer. But Iranian President Mahmoud Ahmadinejad on Saturday vowed that Iran would not back down in its nuclear dispute with the powers.

Analysts view geopolitical factors as among the main causes of recent hike in prices, saying that fears of a new Middle East conflict are behind the new high for oil prices.

Market analysts, specially those from consumer nations, take Bush administration responsible for the price hikes in recent months, saying that it is the “rumors of US and Israeli action against Iran circulating in the markets” that affected oil and the dollar.

Analysts said traders were also keeping a close eye on Tropical Storm Edouard, which formed about 161 kilometers south of the Alabama coast on Sunday afternoon local time.

The Miami-based hurricane centre said the storm was forecast to pass parallel to the Louisiana coast before coming ashore between the refining centers at Houston, Texas City, Beaumont or Port Arthur, Texas on Tuesday morning. Much of the U.S. offshore oil production was also in the likely path of the storm.

Oil firms in the path of the storm, including Royal Dutch Shell and ExxonMobil Corp, said they were activating their emergency operations, but had not taken any other action.

In Nigeria, gunmen kidnapped two French expatriates near the country’s oil industry hub of Port Harcourt in the restive Niger delta, military and security sources said on Sunday.

More than a dozen gunmen late on Saturday ambushed patrons at a local bar in Onne in Rivers state and exchanged fire with navy personnel, resulting in at least three deaths, a security source said.

The latest violence follows a militant attack on two major pipelines owned by Royal Dutch Shell last week, which cut Nigeria’s crude oil output by a further 150,000 barrels per day.

Oil has fallen around $21, or 14 percent, from a peak above $147 a barrel on July 11, due to concerns about a slowdown in world economy and high fuel prices hitting consumption in top energy user the United States.

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