Oil Prices Increase on Iran Nuke Concerns

Monday, February 6th 2006, 10:04 am
By: News On 6

LONDON (AP) _ Oil prices rose Monday after Iran ended all voluntary cooperation with the U.N. nuclear watchdog agency, saying it would start uranium enrichment and bar surprise inspections of its facilities.

Traders fear the dispute between the United Nations and Iran could disrupt supplies from OPEC's second-largest oil producer.

Light, sweet crude for March delivery on the New York Mercantile Exchange rose 75 cents to $66.12 a barrel in electronic trading by afternoon in Europe. The contract had risen as high as $66.62 earlier in the day.

Brent crude for March rose 81 cents to US$64.20 a barrel on London's ICE Futures exchange.

Nymex heating oil advanced more than 2 cents to $1.8045 a gallon, while gasoline rose less than a cent to $1.6900 a gallon. Natural gas lost 17 cents to $8.440 per 1,000 cubic feet.

Iran's announcement Sunday came after the International Atomic Energy Agency reported the nation to the U.N. Security Council over its nuclear program. Iran insists it only wants to generate electricity, but the United States and some of its allies contend Tehran is trying to build a weapon.

The Islamic republic left the door open for further negotiations over its nuclear program and, in an apparent softening of its position, said it was willing to discuss Moscow's proposal to shift large-scale enrichment operations to Russian territory in an effort to allay suspicions.

An Iranian official at the IAEA meeting in Vienna, Austria, had said that proposal was ``dead.'' The comment was made after the IAEA's 35-nation board of governors voted to report Iran to the council, which has the power to impose economic and political sanctions.

Dominic Bryant, an analyst at BNP Paribas, said that while Iran's referral was widely expected, it is still a significant milestone in the dispute, which will be protracted.

Despite relative high stocks of crude and oil products in the U.S., concerns about Iran reducing exports _ either voluntarily or because of any sanctions imposed _ are supporting the market, said Sucden Commodity brokers.

Worries over supplies from Iraq and Nigeria persist as well. Insurgents have targeted oil installations in northern Iraq in efforts to cripple the country's infrastructure. Nigeria's exports have been reduced because of recent violence against oil companies. Insurgents have blown up pipelines and have taken oil workers hostage over the past months.