A variety of factors, including the opening of hurricane season, pushed the NYMEX price of crude oil for July delivery to $73.55 on Sunday, but chief among them was the statement by supreme Iranian leader Khamenei that U.S. aggression could "seriously endanger energy flow in the region," Bloomberg News reported. -- CNN quoted Khamenei as saying that the U.S. "should know that the slightest misbehavior on your part would endanger the region's energy security. You are not capable of guaranteeing energy security in this region." -- "If you, the United States, make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered. We are committed to our national interests, and whoever threatens it will experience the sharpness of this nation's anger," he said. -- He also noted the poor standing of the Bush administration in the eyes of the world: "Your current government is the most hated in the U.S. history from the point of view of the people, whereas ours is the most popular in Iran in the last 100 years. In Latin America such as Peru, Ecuador and Venezuela, governments are elected based on the strength of anti-American slogans. The people of the U.S. -- they don't have security in their private telephone conversations." -- The Financial Times of London observed: "Mr. Khamenei did not specifically mention last week's U.S. offer of talks with Iran if it agreed to suspend uranium enrichment and processing activities. But he referred scathingly to a 'recent message from Americans,' describing it as 'rude, cheap and full of foolish arrogance.'" ...
OIL RISES AS IRAN SAYS U.S. ACTION MAY DISRUPT GULF SHIPMENTS
By Christian Schmollinger (Singapore) and Angela Macdonald-Smith (Sydney)
June 5, 2006
Crude oil rose to the highest in more than three weeks after Iran said U.S. action against its nuclear research program risks disrupting shipments from the Persian Gulf, which supplies about 20 percent of the world's oil.
The U.S. could "seriously endanger energy flow in the region" by acting against Iran, supreme leader Ayatollah Ali Khamenei said yesterday. Iran, which pumps 3.85 million barrels a day, is located along the Strait of Hormuz, a passageway for exports of about 17 million barrels a day from the Gulf region.
"Iran is playing hardball," said Kurt Barrow, an analyst with energy consultant Purvin & Gertz Inc. in Singapore. "We continue to have a very tight supply-demand balance so if Iran were to do anything it would definitely disrupt the market."
Crude oil for July delivery rose as much as $1.22, or 1.7 percent, to $73.55 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $73.26 at 1:43 p.m. Singapore time.
Oil has gained 20 percent this year on concern exports may be cut in Iran and Nigeria, where militants attacked facilities and kidnapped workers. Prices climbed 2.8 percent on June 2 after an assault on a Nigerian oil rig added to concern supply may be insufficient to meet demand during the peak summer driving season in the U.S.
Futures touched $75.35 on April 21 and 24, the highest since trading began in 1983.
In Nigeria, kidnappers yesterday released eight foreign oil workers they took hostage two days earlier in the Niger River delta. The incident was the fourth kidnapping of foreign oil workers this year in Nigeria, Africa's top oil producer.
At its narrowest, the Strait of Hormuz consists of 2-mile-wide channels for inbound and outbound tanker traffic, as well as a 2-mile-wide buffer zone, according to the U.S. Energy Department web site. Closure of the strait would require use of longer alternate routes and raise transportation costs.
"They're not just threatening to withhold their own oil," said David Thurtell, a commodities strategist at Commonwealth Bank of Australia in Sydney. "There's a large amount of oil flowing through the Straits of Hormuz."
U.S. President George W. Bush is the most unpopular leader in the world and "faces protests and public wrath wherever he steps on earth," the official Islamic Republic News Agency cited Khamenei as saying. Iran has repeatedly threatened retaliation if the U.S. takes military action or the United Nations imposes sanctions.
U.S. Secretary of State Condoleezza Rice dismissed the threats, saying the Persian Gulf country needs the oil sales.
"We shouldn't put too much emphasis on a threat of this kind," Rice said yesterday on the "Fox News Sunday" program. "After all, Iran is also very dependent on oil revenue."
The U.S., China, Russia, and three European nations are offering Iran, holder of the world's second-largest oil and natural gas reserves, a package of incentives to re-engage in negotiations on its nuclear program if the government in Tehran abandons efforts to enrich uranium.
The U.S. contends Iran is heading toward development of nuclear weapons, while Iran says it is seeking to develop nuclear plants to produce electricity.
"Iran seems to be sticking to the line that they are going to have nuclear enrichment no matter what," Commonwealth Bank's Thurtell said.
Still, Iran has made similar threats before and the latest statement is unlikely to lead immediately to an emergency, said Andrew Harrington, an industrial analyst at Australia & New Zealand Bank Group Ltd. in Sydney.
"It's pretty serious game-playing, but it's not something that is going to see things rushing to a crisis," Harrington said. "This is a slow burn."
Oil was forecast to fall this week, a Bloomberg News survey of 32 analysts, traders and brokers showed. Fourteen of the respondents, or 44 percent, said prices would drop on signs that rising inventories and higher refinery output will be sufficient to meet gasoline demand during the U.S. summer driving season.
U.S. gasoline use peaks between Memorial Day in late May and Labor Day in early September. Supplies in the U.S. have climbed 4.3 percent since April 21 as refinery output jumped to the highest since August, before Hurricane Katrina hit the Gulf of Mexico coast, the U.S. Energy Department said last week.
Five major hurricanes as powerful as last year's Hurricane Katrina when it made landfall are likely to form in the Atlantic this year, and there's an 82 percent chance that at least one will hit the U.S., forecasters at Colorado State University said last week. The U.S.'s oil output is still about 22 percent less than it was before the hurricanes last year, the U.S. Minerals Management Service said May 3.
The Atlantic storm season runs from June 1 through Nov. 30.
"If another couple of storms come through, especially early, you could see a very big impact that's almost unknowable," ANZ Bank's Harrington said. "In terms of prices there's going to be a fairly high floor on prices just because of that."
The Organization of Petroleum Exporting Countries decided June 2 to keep production quotas at a record high if 28 million barrels a day to help meet demand.
OIL SURGES ON IRAN WARNING TO U.S.
** Secretary of state dismisses threats from Khamenei **
June 5, 2006
Oil prices have surged above $73 a barrel after Iran warned the U.S. that any "misbehavior" could endanger oil movements in the Persian Gulf.
U.S. light crude for July delivery is up 82 cents or 1.1 percent at $73.15 a barrel in electronic trade on Monday, after reaching a high of $73.55 earlier.
The figure is oil's highest price in three weeks. Oil futures reached $75.35 on April 21 and 24, the highest since trading began in 1983.
London Brent crude rose 92 cents to $71.95 a barrel in Monday trade.
Iran's supreme leader, Ayatollah Ali Khamenei, said Sunday that any "misbehavior" directed at Iran would serve to disrupt Persian Gulf shipments.
"In order to threaten Iran, you say that you can guarantee movements of oil through this region," he said, referring to shipments that pass through the strategic Strait of Hormuz near Iran and other countries.
About 17 million barrels a day -- 20 percent of the world's daily needs -- leave the Gulf region via oil tankers using the narrow passageway.
The United States "should know that the slightest misbehavior on your part would endanger the region's energy security," he said. "You are not capable of guaranteeing energy security in this region."
Khamenei did not specify what he meant by disruption or misbehavior.
"If you, the United States, make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered. We are committed to our national interests, and whoever threatens it will experience the sharpness of this nation's anger," he said.
U.S. Secretary of State Condoleezza Rice deflected concerns about the remarks. "We're not going to react to every statement that comes out of Iran," she told CNN's "Late Edition."
"The oil card -- well, let's just remember that Iran is some 80 percent dependent on oil in its budget" and would be unable to handle a disruption, she said.
Oil prices have also been boosted by production problems at U.S. refineries at the start of the peak northern summer driving season.
Iran is embroiled in a standoff with the West over its nuclear ambitions.
Although Washington has no diplomatic relations with Iran -- which President Bush branded part of an "axis of evil" -- the United States last week agreed to join European allies in negotiations with Tehran if Iran suspends its uranium enrichment program and resumes full cooperation with the International Atomic Energy Agency.
The Islamic republic says it wants to pursue nuclear power for peaceful purposes, but the United States and the European Union believe it harbors aspirations to be armed with nuclear weapons.
Six world powers -- Germany and the five veto-wielding members of the U.N. Security Council -- last week agreed on a package of incentives if Iran stops uranium enrichment, or penalties if it refuses.
"That diplomatic process needs to work now with Iran being given the proposal that the six parties put together in Vienna, with Iran recognizing that it now has a path ahead that would allow an end to this impasse," Rice said. "But also that the international community is committed to a second path should that first path not work."
The EU's Javier Solana is expected to leave Brussels on Sunday for a Middle East tour that could accommodate a detour to the Iranian capital.
Rice refused to lay out a timetable for Iran to respond to the latest overture, saying, "I don't believe in setting timelines and deadlines. The only point here is that this can't be endless. The Iranian program is progressing, and the international community needs to know if there is a negotiating option that really has life in it."
Rice also rejected assertions by Iranian leaders that the West is trying to prevent Iran from having nuclear energy.
"If what Iran is looking for is civil nuclear technology, a peaceful program with civil nuclear technology, no one is trying to deny them that," she said.
"They've said from time to time that they have a right to civil nuclear, to a civil nuclear program. We accept that."
"The question is, can they have a civil nuclear program that does not have the proliferation risk associated with having . . . certain fuel-cycle technologies on Iranian territory?"
NO COMPROMISE ON ENRICHMENT PROGRAM
Iranian President Mahmoud Ahmadinejad said Saturday his country is ready to hold "fair and unconditional" talks with the West on Iran's nuclear issue, according to the state-run Islamic Republic News Agency.
Ahmadinejad, who spoke to thousands gathered at Khomeini's shrine, repeated that Iran will not compromise on its right to enrich uranium for peaceful purposes, the news agency said.
But Foreign Minister Manouchehr Mottaki said Iran will formally announce its views on the incentives package after it has been studied.
Ahmadinejad, a hard-line conservative, has sparked international outrage with some of his previous comments denying the Holocaust and calling for the destruction of Israel.
Khamenei -- who didn't mention the diplomatic offer from the six nations -- insisted that the country "is not pursuing a nuclear bomb" and said "we have no intention of war with any government."
"We have no plans that would require us to have a bomb. This is against Islamic principles. Building and maintaining a nuclear bomb costs a lot, and we do not need this," he said.
"We are no threat to anyone, but we are dedicated and committed to our national interests and aspirations," he said. "But if anyone wants to stop us, they will feel the wrath and anger of this nation."
He criticized U.S. policies in Iraq and the Palestinian territories and compared U.S. President George W. Bush with Ahmadinejad, saying the Iranian leader was more welcomed during international visits than was Bush.
"Your current government is the most hated in the U.S. history from the point of view of the people, whereas ours is the most popular in Iran in the last 100 years," Khamenei said.
"In Latin America such as Peru, Ecuador and Venezuela, governments are elected based on the strength of anti-American slogans. The people of the U.S. -- they don't have security in their private telephone conversations," he said.
--CNN's Shirzad Bozorghmehr contributed to this report
IRAN THREATENS OIL DISRUPTION IN EVENT OF U.S. 'MISTAKE'
By Roula Khalaf (London) and Negar Roshanzamir (Tehran)
Financial Times (UK)
June 5, 2006
Iran's supreme leader yesterday warned that energy supplies from the Gulf would be disrupted if the U.S. made a "mistake" against his country, as officials in Tehran prepared to receive the details of an international package of "carrots and sticks" aimed at resolving the nuclear dispute.
In an attempt to raise the diplomatic stakes and deflect growing international pressure, Ayatollah Ali Khamenei, the ultimate decision-maker, appeared to contradict earlier assurances from Tehran that the world's fourth largest oil producer would not use the oil weapon.
"If Americans make a mistake about Iran, the flow of energy from this region will definitely be jeopardized," he said in a speech, insisting, however, that Iran would never be the initiator of war. His comments are likely to unsettle oil markets when they open today.
Iranian analysts say the regime considers one of its most potent cards the ability to disrupt energy supplies through the straits of Hormuz, from which much of the world's oil shipments pass.
But Condoleezza Rice, the U.S. secretary of state, yesterday played down the leader's threats, highlighting that Iran depended heavily on oil revenues.
Mr. Khamenei did not specifically mention last week's U.S. offer of talks with Iran if it agreed to suspend uranium enrichment and processing activities. But he referred scathingly to a "recent message from Americans," describing it as "rude, cheap and full of foolish arrogance."
Sticking to Iran's official position that it has no intention of building a nuclear bomb, he suggested the regime felt emboldened and saw no need to make concessions. He said the government in Tehran was "one of the most popular in the last 100 years since the constitutional revolution", while the Bush administration was "one of the most hated governments in the history of the U.S."
Despite an agreement reached last Thursday by the U.S., U.K., France, Russia, China, and Germany, to offer Tehran a package of incentives in return for suspending uranium enrichment, Mr. Khamenei insisted that there was no international consensus on Iran policy.
Yet the bold rhetoric combined with milder messages from other senior officials. President Mahmoud Ahmadi-Nejad said on Saturday Iran would study the international proposals and not rush to judgment. The package is set to be delivered to Iran by Javier Solana, the European Union foreign policy chief, possibly this week.
Analysts in Tehran said the occasion of Mr. Khamenei's speech marking the anniversary of the death of Ayatollah Ruhollah Khomeini, founder of the Islamic republic, required the projection of a defiant image.
But the leader's comments also highlighted the challenge ahead for the world community in trying to persuade the regime to give up uranium enrichment. "The leader wants to show that Iran can stand firm and that it won't falter," said one analyst. "At the same time, Iran will study the proposals and postpone any decision on them as long as possible."