Oil Prices Rise, Hold Above $64 a Barrel

Tuesday, December 20th 2005, 10:41 am
By: News On 6

VIENNA, Austria (AP) _ Oil prices rose Thursday amid market jitters over Iran's nuclear development and on traders' convictions that economic growth will cause energy consumption to rise.

The upward pressure came despite a U.S. report Wednesday showing a surge in inventories of gasoline and heating oil.

Light, sweet crude for February delivery rose 58 cents to $64.52 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange.

Heating oil jumped nearly 2 cents to $1.7470 a gallon, while gasoline surged 2 1/2 cents to $1.7576 a gallon. Natural gas was up less than 2 cents at $9.254 per 1,000 cubic feet.

February Brent crude rose 81 cents to $62.98 on the ICE Futures exchange in London.

The threat of instability in the Middle East raised concerns this week after Iran _ a major oil producer _ said Tuesday it would allow work at its nuclear research facilities to resume despite warnings from Western countries.

``We believe that Iran matters more than is currently priced in, and that Iran's external relations remain the key wild card,'' Barclays Capital's Paul Horsnell wrote in a research note. ``We continue to see Iran as representing a severe upside risk for prices this year.''

Iran said its action was to prepare for fuel research only and that it was not resuming work to produce nuclear weapons.

The U.S. and Britain said Wednesday that Western countries will likely seek economic sanctions against Iran after it restarted nuclear activity. Iran's president said his country would not be ``bullied'' and would push ahead with the program.

In Vienna, PVM Oil Associates suggested the Iran card _ Security Council oil sanctions _ might not be played, however.

``China is likely to veto such an action due to the Asian country being highly dependent on Iranian oil,'' PVM said in its daily energy market report.

On Wednesday, the U.S. Energy Department said domestic supplies of gasoline grew by 4.5 million barrels last week and that supplies of distillate fuel, which include heating oil and diesel, increased by 4.9 million barrels.

``Most of the traders are looking at the Iranian issue over the bearish inventory report,'' said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

The agency's weekly report also showed that U.S. demand has held firm over the past month in the face of high prices.