TEHRAN (FNA)- Oil rose to $116 a barrel on Thursday, climbing for a third straight session, as Washington’s missile shield deal with Poland angered Russia, adding to international tension.
The spat adds to political factors that has supported oil prices in recent months, such as the dispute over Iran’s progress in civilian nuclear technology. A weaker dollar also boosted the appeal of commodities as an inflation hedge.
“There’s a myriad of geopolitical factors rumbling in the background – Russia, Iran,” said Tony Machacek, broker at Bache Commodities Ltd. “Also, the dollar is weaker.”
Iran, the world’s fourth-largest oil exporter, has repeatedly said the market is well-supplied and blames the rise in prices during the last few months on speculation, a weak dollar and geopolitical tension. Iran also blames sanctions that have been imposed against Tehran as another major contributory factor to the recent rise in prices.
OPEC members have long maintained that factors beyond their control, such as speculation, a weakening US dollar, inadequate refining capacity and geopolitical tensions are behind the drive in crude oil prices.
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.
Oil jumped as high as $147.27 a barrel on July 11 after the Jerusalem Post said Israeli war planes practiced over Iraq, possibly preparing for a strike against Iran, the second- largest member of OPEC.
But prices slid lower last month after Iran and the West announced renewed efforts to resolve the nuclear standoff.
US crude gained 66 cents to $116.22 a barrel by 0851 GMT, having risen as high as $117.00 earlier in the session. Brent crude climbed 50 cents to $114.86.
The United States and Poland signed a deal on Wednesday to station parts of a US missile defense shield on Polish soil, drawing a sharp response from Russia, the world’s second-largest oil exporter.
The pact comes as relations between Russia and the West have been strained by Moscow’s military intervention in Georgia. The conflict there has disrupted the transit of Azeri oil through Georgia.
International tension outweighed a US government report that on Wednesday showed crude inventories rose by 9.4 million barrels, the largest weekly increase since March 2001.
Oil has fallen from a record high of $147.27 a barrel reached last month on eased tensions between Tehran and the West and evidence that demand is slowing. Prices remain up about 15 percent so far this year and have climbed from below $20 in early 2002.
Also supporting the market were expectations that the Organization of the Petroleum Exporting Countries and Saudi Arabia, its top producer, may decide to trim supply in a bid to stem a further price fall.
Saudi Arabia boosted oil output in July to 9.7 million barrels a day from 9.45 million bpd in June, far above the country’s informal OPEC target. OPEC meets on Sept. 9 to review output policy.
“As prices drop, Saudi Arabia may cut back on its recent increase in production, which could halt the most recent price decline,” the US Energy Information Administration said in its weekly review of the market.