Oil prices higher over Iran-UN standoff

Oil prices inched up Friday on market expectations that a current standoff between the West and Iran over the country’s nuclear program would unlikely result in major sanctions against

OPEC’s second-largest producer.

Light, sweet crude for October delivery gained 9 cents to $70.35 a barrel in Asian electronic trading on the New York Mercantile Exchange.

The contract on Thursday rose 23 cents to settle at $70.26 a barrel, after Iran defied a
United Nations deadline to stop enriching uranium, opening doors for sanctions.

Iran’s hard-line president, Mahmoud Ahmadinejad, lashed out at the United States Thursday, calling it “tyrannical” and insisting Tehran would not be “bullied” into giving up the right to use nuclear technology.

U.S.
President George W. Bush called for “consequences to Iran’s defiance,” saying the “world now faces a grave threat from the radical regime in Iran.”

But most market participants did not expect any major sanctions to be imposed against the country as Russia and China were likely to oppose such a move.

“The Iranian situation really has been expected by most market participants, that Iran would not agree to stopping uranium enrichment and also that China and Russia are likely to veto any U.N. suggestions of sanctions,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

“The situation will likely drag on with no significant development on either side, but will continue to provide a high floor for oil prices,” he said.

Commonwealth Bank of Australia commodity strategist Tobin Gorey said the market may start reassessing the need to maintain a premium that fears over potential disruptions to Iranian supplies has placed on oil prices.

Analysts have said Iranian concerns added at least $10 a barrel to oil futures.

Gorey said also that high crude prices reflected strong global demand and could continue climbing.

“The oil market, both crude and refined level, is still only just keeping up with demand,” Gorey said.

Supply concerns were also tempered after BP PLC hinted that production at Prudhoe Bay could be restored to normal levels earlier than expected.

In other Nymex prices, gasoline futures added 0.69 cent to $1.7900 a gallon while heating oil prices fell 0.27 cent to $2.0084 a gallon. Natural gas futures dropped 19.8 cents to $5.85 per 1,000 cubic feet.

U.S. markets will be closed Monday for Labor Day.

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