BLBG:Oil Drops and Heads for Weekly Decline After Saudi Denial on Explosion
Oil fell in New York and headed for the first weekly decline in four after Saudi Arabia denied a reported pipeline explosion in its Eastern province.
Futures slid as much as 0.4 percent in New York after climbing to the highest intraday price in 10 months yesterday. There was no sabotage at oil facilities in the Qatif area, according to Major General Mansour Al-Turki, a spokesman for the Saudi Arabian Interior Ministry. Prices rose above $110 a barrel for the first time since May after Iran’s Press TV said an explosion hit oil pipelines in the area, home to Saudi Arabia’s largest refinery. London’s Brent crude climbed to the highest level in almost four years yesterday.
“The Saudi situation indicates the sheer volatility in the market,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney. “The movement and sustainability of the price up around these levels is 100 percent backed on the concerns in the Middle East.”
Oil for April delivery dropped as much as 42 cents to $108.42 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.53 at 4:47 p.m. Sydney time. The contract closed up $1.77 at $108.84 yesterday, after rising as high as $110.55. Prices are down 1.1 percent this week and up 6.2 percent from a year ago.
Brent oil for April settlement slipped 58 cents, or 0.5 percent, to $125.62 on the London-based ICE Futures Europe exchange. It surged as much as 4.7 percent to $128.40 yesterday, the highest price since July 2008, the month that Brent reached a record $147.50. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $17.09 today.
Saudi Fire
A fire occurred in an industrial area in the town of Safwa in Shiite-dominated Qatif near Saudi Arabia’s Ras Tanura refinery, according to a person with knowledge of the situation. The blaze didn’t damage the refinery or any pipeline in the area, said two people familiar with the situation who declined to be identified.
“The situation is overdone for now but the geopolitical risk does keep a boil under the market,” said Anthony Nunan, a senior adviser for risk management at Mitsubishi Corp. (8058) in Tokyo. “Understandably everyone is on edge because of the situation in Iran.”
Oil has gained this year on concern a dispute between the West and Iran over the Persian Gulf nation’s nuclear program will lead to military conflict in a region that holds more than half the world’s crude. Israeli Prime Minister Benjamin Netanyahu is scheduled to meet U.S. President Barack Obama in Washington on March 5 to discuss the issue.
Possible Attack
The Obama administration is escalating warnings that the U.S. may join Israel in an attack on the nuclear facilities if Iran doesn’t dispel concern that its atomic-research program is aimed at producing weapons. Air Force Chief of Staff General Norton Schwartz told reporters this week that the Joint Chiefs of Staff have prepared military options.
Crude prices may rise next week as U.S. gasoline gains amid declining inventories, a Bloomberg News survey showed. Fourteen of 25 analysts, or 56 percent, forecast oil will increase through March 9. Eight respondents, or 32 percent, predicted prices will fall and three estimated there will be little change. Last week, 43 percent of surveyed analysts expected an increase.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
