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Oil ends at new record near $141 on supply worries


Oil ends at new record near $141 on supply worries

Tuesday July 1, 4:40 pm ET 
By Adam Schreck, AP Business Writer


Oil climbs to new settlement record near $141 on concerns about global supply, Mideast tension 


NEW YORK (AP) — Oil closed at a new record near $141 a barrel Tuesday on worries about tight supply and mounting tensions in the Middle East. In the U.S., prices at the gas pump edged to their highest point yet.
Crude prices resumed their advance as the head of the International Energy Agency said the world is experiencing its “third oil price shock,” comparing the effects of today’s prices with the oil crises that began with the 1973 Arab oil embargo and the 1979 revolution in Iran.


IEA chief Nobuo Tanaka added that OPEC is pumping oil at record levels and other producers “are working at full throttle.” His comments reinforced the IEA’s latest prediction that global supplies will remain pinched despite record prices and falling demand in the U.S. and Europe.

“Day-to-day market noise can be driven by speculators,” Tanaka said. “High oil prices are driven by fundamentals.”

Meanwhile, during a visit to Berlin, U.S. Treasury Secretary Henry Paulson said “there don’t seem to be any obvious short-term solutions” to soaring oil prices.

Light, sweet crude for August delivery rose 97 cents to settle at a new high of $140.97 a barrel on the New York Mercantile Exchange. Prices at one point rose as high as $143.33, just 34 cents shy of Monday’s trading record.

Ongoing tension in the Middle East — a concern that has helped fuel oil’s recent rise — continued to weigh on traders’ minds Tuesday.

ABC News quoted an unnamed senior Pentagon official as saying there is an “increasing likelihood” that Israel will strike Iran’s nuclear facilities before the end of the year. Such an attack could prompt Iran to retaliate, potentially disrupting oil supplies in the strategically vital Persian Gulf.

State Department spokesman Tom Casey said he had “absolutely no information that would substantiate” the ABC report when asked about it at a briefing.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill., called the news report “more of the same” but acknowledged it was having an effect on energy market psychology.

“The market’s forced to insert some type of risk premium on geopolitical developments,” he said.

Iran is the world’s fourth-largest oil producer and OPEC’s second-largest exporter. About 40 percent of export tanker traffic passes through the Strait of Hormuz, a narrow choke-point bordered by Iran at the mouth of the Gulf.

In the U.S., gas station operators nudged the record for a gallon of regular a tenth of a penny higher, to an average of $4.087 a gallon nationwide, according to AAA, the Oil Price Information Service and Wright Express.

In a weekly report Tuesday, MasterCard’s SpendingPulse survey found that U.S. demand for gasoline fell 2.1 percent last week compared with the same week a year ago, and is off by an average of 2.9 percent over the past four weeks.

Recent reports from the U.S. Energy and Transportation departments have also shown that Americans, by far the world’s largest oil consumers, are driving less as prices rise. Demand is rising rapidly in other parts of the world, however.

In its Medium-Term Oil Market Report on Tuesday, the Paris-based IEA said demand would rise most in developing countries, with Asia, the Middle East and Latin America accounting for nearly 90 percent of demand growth over the next five years.

As oil entered the second half of the year at a fresh settlement record, trader Stephen Schorck and other analysts predicted that prices could soon reach $150 a barrel. Crude shot up nearly 50 percent in the first six months of 2008 in part because investors turned to commodities as a hedge against the falling greenback.

“As we look ahead to the third quarter the story remains, as long as the (dollar) fails to appreciate, energy will fail to depreciate,” he wrote in a daily market newsletter.

In other Nymex trading, heating oil futures rose 3.35 cents to settle at $3.9435 a gallon, while gasoline futures rose 1.43 cent to $3.5134 a gallon. Natural gas futures jumped 15.2 cents to settle at $13.505 per 1,000 cubic feet.

In London, Brent crude futures rose 84 cents to settle at $140.67 on the ICE Futures exchange.

Associated Press writers George Jahn in Madrid, Spain, and Foster Klug in Washington contributed to this report.

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