Oil Tops $70 in Expectation of War
The price of oil rose again yesterday. North Seas Brent sold for more than $70 per barrel, a seven-month high. This reflects investors' assessment of the risks of military action beginning in the Persian Gulf in connection with Iran's refusal to curtail its nuclear program. Prices began to rise after Iranian President Mahmoud Ahmadinejad announced the release of the sailors, who returned to their homeland yesterday.
Brent rose 2 percent in price. Russian Urals rose to $66.80 per barrel. Notably, futures were significantly lower. The price for May futures for Brent was $68.25 and for Texas light and sweet WTI $64.50 per barrel. Deutsche UFG analyst Pavel Kushnir estimated that war worries added $6-8 to the price of a barrel now. “If a military operation by the United States begins, there is no upper limit on price growth. Panic will reign on the market,” noted Rakesh Shankar, chief economist of Moody's economy.com.
Data on U.S. reserves of oil and petroleum products supported the market. The U.S. Department of Energy reported that, in the week ending March 30, the country's stockpile of oil grew 4.3 million barrels to 332.7 million. Gasoline stockpiles were reduced for the second month in a row, falling by 5 million barrels to 205.2 million, a greater reduction than analysts expected, and just as vacation season is beginning. That add fuel to the price increase for oil.
The price rise will have a significant effect on the Russian economy. Because of the specifics of the tax system, the state, and not the oil producers, will receive most of the price increase. Companies pay 90-percent taxes on all money over $25 per barrel of oil. Every dollar of price increase for oil represents an additional $1.8 billion for the Russian federal budget, Troika Dialog economist Anton Struchenevsky explained.
www.kommersant.com
All the Article in Russian as of Apr. 06, 2007
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