Oil prices hit $78 a barrel

The price of oil rose above a record $78 a barrel as fears grew that the conflict between Israel and Hezbollah fighters in Lebanon could spread to other Middle East countries.

    The price of crude oil has risen by 4% during the week

    US crude went up to $78.40 a barrel during trading on Friday before settling up 33 cents at $77.03. Crude oil on the New York Mercantile Exchange rose $2.94 - or 4% - during the week. London Brent rose 58 cents to $77.27 a barrel, after jumping to a record of $78.03 a barrel earlier in the day.

    Iran's nuclear standoff with the West, fears that Nigeria’s oil supply will be affected by militant attacks, and falling US crude supplies also increased the price of oil.

    "The speculators are out there panicking about Israel, because they think it's going to spread through the Middle East," said Mike Barry, director at London's Energy Market Consultants.

    Neither Israel nor Lebanon are oil producers; but the Middle East collectively pumps nearly a third of the world’s output. The situation has made oil traders nervous.
       
    Jittery market

    "Geopolitical developments, over which OPEC has no influence, have been behind this sudden rise in volatility"

    Opec statemnent

    "Rarely has this market been as jittery," said Anthony Sabino, a professor at St. John's University in New York.

    Oil producers have tried to calm the market, saying there were sufficient supplies to meet global demand.
      
    "The market remains well-supplied with crude," the Organisation of Petroleum Exporting Countries, OPEC, said in a statement. "Geopolitical developments, over which OPEC has no influence, have been behind this sudden rise in volatility."

    Prices for oil futures contracts to be delivered from December 2006 to August 2007 were trading above $80, showing the market's continued strength.

    Economic growth

    Experts say oil prices can fall if
    current tensions ease

    Analysts have expressed concerns about the effects of high energy prices on economic growth. However, Sam Bodman, the US energy secretary, said on Friday that the economy of the world's top energy consumer has held up against rising fuel costs.
       
    "We have found that the US economy has been surprisingly resilient, surprisingly able to manage the increase in prices that we have already seen," Bodman said.

    Oil prices have averaged $67.67 a barrel so far this year, but are still substantially below the inflation adjusted $87.65 average of 1980.
       
    Some experts noted that much of the money chasing oil was speculative, and said prices could easily fall if tensions ease.

    The price of crude oil has risen by 30% this year.

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    Double standards: 'Why aren't we all with Somalia?'

    Double standards: 'Why aren't we all with Somalia?'

    More than 300 people died in Somalia but some are asking why there was less news coverage and sympathy on social media.

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    Kobe Steel: A scandal made in Japan

    Kobe Steel: A scandal made in Japan

    Japan's third-largest steelmaker has admitted it faked data on parts used in cars, planes and trains.