Tension fuels oil price

Press, 4 August 1987, Page 6

Tension fuels oil price

NZPA-Reuter Tokyo

Oil prices surged to more than SUS2O a, barrel yesterday because of fears that Iran would step up attacks on Gulf shipping after the death of Iranian pilgrims in clashes in Mecca. Saudi authorities blamed Iranian demonstrators for the clashes, while Iran blamed the United States and the Saudi Government. Financial markets turned cautious after the week-end news. The United States dollar rose

slightly against the yen, partly in the belief that Japan, a big oil importer, would suffer greatly from any supply disruption. Amid the already tense atmosphere in the Gulf, oil traders now fear Iranian attacks are more likely and may spread to Saudi flag vessels.

An escalation in hostilities in the Gulf could lead to a severe disruption in oil supplies and cause prices to leap as much as SUSIO a barrel, say oil traders. “The Iranians don’t want to get involved in a

war with the United States so this is only a possibility, not a probability,” said one international trader in Tokyo. Traders fear also that conflict between Iran and Saudi Arabia, the two most powerful members of the Organisation of Petroleum Exporting Countries, will disrupt O.P.E.C. policies aimed at oil market stability. Iran, a traditional O.P.E.C. price hawk, has been calling for an O.P.E.C. oil price of SUS2B while Saudi Arabia has so far been instru-

mental in persuading Iran to accept a gradual increase in the reference price, now set at SUS 18.

“The market is very, very nervous,” a Japanese trader said. Sellers of Britain’s North Sea benchmark crude Brent Blend hiked their prices a dollar to 5U520.85 a barrel for cargoes loading in September.

Oil traders expect spot market prices will surge, fuelled by strong speculative buying on the futures markets.