Oil falls as Iran says seeking ways to ease tensions with U.S.
Iranian President Mahmoud Ahmadinejad, who said last month his country has produced nuclear fuel, wrote a letter to U.S. President George W. Bush proposing “new ways'' to ease tension between the two states, said Gholam Elham, a government spokesman. The U.S. suspects Iran is trying to build a nuclear bomb. Iran says it only wants to produce electricity.
“Everyone is watching Iran,'' said Stanislav Nazarati, a trader at Estonia-based Letofin AS.
“If you look at the map, you see that Iran is in a place where all transport corridors will feel the impact in a military strike.''
Iran would probably retaliate for any strike against its nuclear facilities by trying to choke off oil shipments through the Strait of Hormuz, military planners said last week, among them Michael Eisenstadt at the Washington Institute for Near East Policy. Almost a quarter of the world's oil flows through Hormuz, a narrow waterway at the mouth of the Persian Gulf.
Oil for June delivery fell as much as $1.11, or 1.58 percent, to $69.08 on the New York Mercantile Exchange, where it traded at 2:29 p.m. in London.
Brent crude oil for June traded at $69.85 a barrel, down $1.10 cents, on the ICE Futures exchange in London.
UN review
Ahmadinejad wrote the letter after Foreign Ministry spokesman Hamid Asefi said yesterday in Tehran Iran won't negotiate with the U.S. because it's employing “the politics of threat.''
Permanent members of the United Nations Security Council will meet in New York today to try to agree on a resolution demanding that Iran stop enriching uranium.
The Iranian government spokesman, Elham, declined to comment today on whether Ahmadinejad's letter to Bush mentions Iran's nuclear program, according to Iran's state-run Fars News. “Geo-political risks are enormous,'' said Ralph Herre, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany.
“The biggest threat by far is stemming from the dispute over Iran's nuclear program.''
The UN's International Atomic Energy Agency should be the forum for resolving a dispute over Iran's nuclear program, not the Security Council, Ali Larijani, the Iranian government's chief nuclear negotiator, said today in Turkey.
The U.S., U.K and France say they will seek sanctions should the government in Tehran fail to comply. Russia and China are seeking a resolution that stops short of any threat of military action against Iran.
Prices drop
Crude oil trading in New York had the biggest two-day decline last week since May 2005, after a U.S. Energy Department report showed the nation's gasoline stockpiles rose for the first time in nine weeks in the week ending April 28. That eased concern refiners won't be able to meet the summer demand for fuel.
“The main factor for oil prices has shifted to what's going on locally in the U.S.,'' said Kaname Gokon, a commodities analyst at Okato Business Service in Tokyo.
“The situations in Nigeria and Iran won't change, basically. If gasoline inventories rise, crude oil prices should fall in return.''
Gasoline for June delivery fell as much as 2.46 cents, or 1.2 percent, to $2.016 a gallon in after-hours trading in New York. The average U.S. pump price of regular gasoline rose 13 percent the past month to $2.902 a gallon on May 7, according to the American Automobile Association, the nation's largest motoring club.
May fall further
Crude oil may fall again this week as U.S. refiners produce more gasoline for summer, a Bloomberg News survey said last week. Twenty of 40 analysts, traders and brokers said prices will drop. Fourteen projected a gain and six forecasted little change.
Oil prices are likely to remain high for the next four or five years because the Organization of Petroleum Exporting Countries lacks refineries and spare production capacity, Claude Mandil, the executive director of the International Energy Agency, said today.
Spare capacity at OPEC, which supplies about 40 percent of the world's crude, has fallen to less than 2 million barrels a day, or about 2 percent of world consumption, compared with as much 4 million barrels in 2002.