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Oil Rises to a Record $75.35 on concern about Iran and Nigeria


April 21 (Bloomberg) -- Crude oil rose to a record $75.35 a barrel in New York on concern that shipments from Iran and Nigeria will be disrupted as the U.S. increases output of gasoline for the summer driving season.

The dispute over Iran's nuclear program has intensified, increasing the chances of sanctions against the world's fourth- biggest oil producer. Rebel attacks in Nigeria have shut about 20 percent of output in Africa's biggest oil producer. Oil was pulled lower in early trading on speculation that refiners will increase output because of improved profit margins.




``Any kind of supply disruption will send us up toward $100,'' said Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, whose clients have about $400 million in accounts at the firm. ``Even without a hiccup we will see prices rise because of the supply-demand imbalances.''

Crude oil for June delivery rose $1.48, or 2 percent, to $75.17 a barrel on the New York Mercantile Exchange, the highest close since trading began in 1983. Futures touched $75.35 a barrel, an intraday record. The May contract, which expired yesterday, reached records the last three days. Prices are 39 percent higher than a year ago.

``The suppliers of the world are having great difficulty keeping up with demand,'' Energy Secretary Samuel Bodman said at a conference in Washington. ``This is a tax, if you will, on economic activity. This is a horrific burden on American families.''

U.S. stocks declined as oil prices climbed this afternoon. The jump in energy prices may bolster inflation, increasing the likelihood that the Federal Reserve Bank will boost its benchmark interest rate.

``If crude oil remains at this level or moves higher the moderate slowing of the economy could'' intensify, said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina.

Inflation Adjusted Prices

Oil prices more than doubled in 1979 after a revolution in Iran slashed the nation's oil exports. By February 1981 U.S. refiners were paying an average $39 a barrel for imported oil, according to Energy Department figures, or $86.88 in 2006 dollars.

``This is similar to the 1970s when there was a permanent readjustment in oil prices,'' Schiff said.

Iran has defied the United Nations by enriching enough uranium to fuel a nuclear reactor. Russia yesterday rejected a call from the U.S. to halt construction of a nuclear plant in Iran to put pressure on the Persian Gulf country to stop its nuclear enrichment program. The plant should be completed by the end of this year.

Can't Halt Program

``The U.S. is incapable of doing anything to stop Iran's nuclear program,'' said Mordechai Abir, director of energy research at Burnham Securities Inc. in New York. ``The U.S. is not going to attack Iran so there is no reason for the Iranians to use their oil weapon. This crisis is being driven by words and has added $10 to $15 to the cost of oil.''

Concern that Iran might reduce shipments if sanctions are imposed has helped bolster prices 23 percent this year.

Oil prices would soar to $100 a barrel if the U.S. attacks Iran in a dispute over the country's nuclear program, Venezuelan President Hugo Chavez said yesterday.

``An invasion of Iran would end what little stability exists in the Middle East,'' Chavez told reporters in Brazil in remarks broadcast by the state television channel. ``The price of oil could reach $100.''

Brent crude oil for June settlement rose $1.39, or 1.9 percent, to $74.57 a barrel on the London-based ICE Futures exchange, the highest close since the contract began trading in 1988. Futures touched $74.79 a barrel, an intraday record.

Nigerian Oil

The Movement for the Emancipation of the Niger Delta rejected a plan announced by the Nigerian government to increase development in the Niger River delta. The group threatened new attacks on oil companies this week. About 500,000 barrels a day of Nigeria's output remains shut, Oil Minister Edmund Daukoru said on April 18.

``The Nigerian government doesn't have the ability to control the region and will have to give the rebels what they want if the oil is to come back,'' Abir said. ``It doesn't look like we will be seeing this highly sought-after oil anytime soon.''

Nigerian oil is prized by refiners because of the amount of gasoline it yields.

Prices have also surged on speculation that U.S. gasoline stockpiles will be insufficient when consumption accelerates in the summer months. Gasoline stockpiles plunged 5.4 million barrels last week, the seventh-straight weekly decline, the Energy Department reported on April 19.




G-man, remember what I said about political stability and commodity prices in Africa in another thread?