Oil supplies will remain tight, says IEA

MADRID, Spain - Oil supplies will remain tight despite record prices that have reduced demand, according to the International Energy Agency, and its executive director said Tuesday that the world is in the grip of its third "oil shock." Downsizing its estimate of how much oil will reach the market, the IEA predicted supply will exceed projected demand only by 2 million barrels a day -- a thin cushion. The IEA is the energy watchdog for the Organization for Economic Cooperation and Development, a grouping of the world's most industrialized countries. In its annual Medium Term Report, it said the world's estimated daily oil needs would rise from 86.87 million barrels this year to 94.14 million barrels in 2013 -- less than it anticipated last year, because of skyrocketing prices. The agency said there will be 1.4 percent less demand this year and 3.43 percent less in 2012, the last year for which the report gave figures. As Western nations cut back, China and other emerging economies will consume more crude, the IEA said. "We are clearly in the third oil price shock," said IEA Executive Director Nobuo Tanaka. The first oil crisis struck in 1973 when Arab states declared an oil embargo. The second began in 1979 following the Iranian Revolution.

Oil prices pass $143 a barrel; US gas hits high

Oil prices surged past $143 a barrel for the first time ever Monday, and the price for a gallon of gas hit an all-time high in the United States. Supply concerns and a fragile global economy continue to drive the price of oil to new highs, as well as continued tensions in the Middle East. Light, sweet crude for August delivery rose $2.13 to $142.34 a barrel on the New York Mercantile Exchange. In early electronic trading, the contract hit a record $143.67. On Friday, crude futures had spiked at a record $142.99 a barrel in New York before falling to $140.21. In London, Brent crude futures rose $2.24 to $142.55 a barrel on the ICE Futures exchange in London. Earlier Monday, the price for Brent had peaked at $143.91. A survey in the U.S., meanwhile, showed that prices at the pump continued to rise, with the national average for gasoline at $4.086 a gallon. The previous record of $4.08 was reached June 16. "The main factors behind the rise today are the U.S. dollar remains fragile and geopolitical tensions, particularly surrounding Iran," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney. "That's unsettling for the oil market." The Iraqi government opened six oil fields to international bidding Monday as the nation attempts to boost daily production by 60 percent. The potential participation of big Western companies like BP, Chevron, Exxon Mobil, Shell and Total SA in Iraq's oil industry has been criticized in recent weeks following published reports that several were close to signing no-bid contracts with the Iraqi government. Those contracts were expected to be announced Monday, but Iraqi Oil Minister Hussain al-Shahristani instead named 35 companies that would be qualified to bid on service contracts for the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan. Analysts said daily trading volumes for Nymex oil would probably continue last week's trend and stay on the light side, leading to higher volatility during the trading sessions. "We would not expect liquidity to be much better this week, as it will be a short trading week due to the July 4 weekend," Olivier Jakob, of Petromatrix in Switzerland, said in a research note. Worries about tight oil supplies and growing global demand are also major factors in the doubling of oil prices since last year, Moore said. Traders were digesting reported comments from the commander of Iran's Revolutionary Guards, who warned that if his country is attacked,Tehran would strike back by barraging Israel with missiles. In a report published Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also move to control a key oil passageway in the Gulf. Iran is the world's fourth-largest oil exporter and about 60 percent of the world's oil passes through the strategic Strait of Hormuz. The report comes after the disclosure of a recent Israeli military exercise over the Mediterranean Sea that was seen as sending a message to Iran to curb its nuclear ambitions. The dollar has weakened on expectations the Federal Reserve Board won't soon raise interest rates as the U.S. economy struggles with low growth. The Fed left its benchmark rate unchanged last week. The dollar dipped fell to 105.81 yen Monday from 106.12 late Friday. The euro also lost some ground on the U.S. currency, down to $1.5774 from $1.5808. ECB President Jean-Claude Trichet's hawkish stance (on) inflation" could mean the dollar may be headed for further weakness against the euro "and that's not bearish for oil," said The Schork Report edited by U.S. analyst and trader Stephen Schork. A falling U.S. stock market has also led investors to seek higher-yielding investments such as oil and other commodities. The Dow Jones industrial average has fallen to its lowest level in nearly two years — and is down nearly 20 percent since its peak in October. In other Nymex trading, heating oil futures rose 5.86 cents to $3.9652 a gallon (3.8 liters) while gasoline prices rose 4.39 cents to $3.5451 a gallon. Natural gas futures increased 15.7 cents to $13.355 per 1,000 cubic feet.