NEW YORK – Crude futures rose Friday, on oil supply worries after the International Atomic Energy Agency said Iran defied the U.N. Security Council by enriching uranium.
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Iran, OPEC's second-largest oil producer, has said it seeks the technology only to generate power, but some other countries, including the United States, believe it aims to create weapons.
Iran has also said it does not intend to halt oil exports as a political tactic, but some traders fear it's a possibility if the dispute escalates. That bullishness has been aggravated by tight U.S. gasoline supplies, strong global demand and supply disruptions by separatist rebels in Nigeria, the fifth-largest source of U.S. oil imports.
Light, sweet crude for June delivery rose 91 cents to settle at $71.88 a barrel Friday on the New York Mercantile Exchange.
On London's ICE futures exchange, Brent crude for June rose $1.11 to settle at $72.02 a barrel.
Gasoline futures rose 2.02 cents to settle at $2.0921 a gallon, while heating oil rose 2.72 cents to settle at $2.0129 a gallon.
Prices began rising earlier Friday as the United Nations' deadline approached and Iran's hard-line president, Mahmoud Ahmadinejad, offered no hints of conciliation, vowing that "no one" could make his country give up nuclear technology and that the country "won't give a damn" about any U.N. resolutions concerning its nuclear program.
The U.N. Security Council is expected to meet next week to start a process that could result in punitive measures against Iran. The possibility of that inciting the Islamic republic to cut their oil exports is what traders are bracing for.
"As an oil market participant, it's hard to know," said Fimat USA analyst John Kilduff, adding that the Iran situation has added about $10 a barrel to crude futures. "Given all the rhetoric ... everyone's positioning themselves accordingly."
Kilduff added that an agreement with Iran, as well as an agreement between the Nigerian government and separatists, could push crude prices down back towards the $60-a-barrel mark. But if the tension keeps mounting, he said, they will likely rise above $80 a barrel, surpassing the all-time peak of $75.35 reached briefly last Friday.
On Thursday, oil prices had fallen for the fourth straight day after the World Bank tentatively resolved a dispute with Chad and China increased its interest rate, which had threatened to shut off an oil pipeline.
Traders speculated that Chinese oil demand might slow after the nation's central bank said it would raise benchmark one-year lending rates to 5.85 percent from 5.58 percent. China is the world's second-largest oil consumer after the United States.
Also helping to cool prices briefly was the easing of worries about U.S. gasoline supplies ahead of the peak summer-driving season. The U.S. Energy Information Administration on Wednesday reported a sharp recovery in American refinery operations, and President Bush directed the Environmental Protection Agency to grant fuel requirement waivers to states experiencing spot shortages amid a transition to a new blend of motor fuel.
Still, those worries haven't abated, as stores of the new blend have yet to reach sufficient levels to make traders comfortable as the May 6 transition deadline nears, Kilduff said.
The U.S. retail price for a gallon of regular unleaded gasoline was $2.929 Friday, about 60 cents higher than a year ago, according to AAA's daily fuel gauge report. Many say it will likely surpass the record $3.057 a gallon reached last fall after hurricanes battered the Gulf coast and devastated U.S. oil refining.
Crude oil prices are about 40 percent higher than a year ago. But accounting for inflation, prices are still about 20 percent below the records reached in 1981, when supplies became tight after a revolution in Iran and a war between Iraq and Iran.
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