Crude oil price eases as Iranians respond to offer

MARK SMITH, Deputy Business Editor

Published on 5 Jul 2008

The price of black gold fell from near-record highs yesterday as geopolitical tensions eased after Iran said it had given a "constructive" response to the incentives package offered by six world powers aimed at resolving a stand-off over Tehran's disputed nuclear ambitions.

However, analysts remained bullish and said they expected the $150-a-barrel level to be tested before long.

Light, sweet crude settled $1.19 down at $144.10 a barrel, with volumes lower than usual because markets were closed in the US for the July 4 independence holiday.

Many analysts are anticipating what they call a "bull channel", effective around $147 a barrel, which they say could lead to $170 by late September and $200 by mid-January 2009.

Crude futures, which have risen more than 50% so far this year, reached a record high of $145.85 in New York on Thursday.

In London, Brent crude futures fell $1.17 to $144.91 a barrel yesterday - higher than its US equivalent for a third day on expectations that seasonal maintenance this month will curb output from North Sea fields.

Gains by the dollar on Thursday helped keep oil prices from rising further.

The dollar yesterday initially gained on most currencies, but later lost ground, falling to $1.5679 against the euro.

A weak dollar has boosted oil prices as investors often buy commodities as a hedge against inflation. A weak dollar also makes oil less expensive to investors overseas.

Meanwhile, sabre-rattling in the Middle East is one reason for oil's surge this week. Traders have been concerned that conflict with Iran could disrupt tight global supplies.

The offer of incentives proposed by the US, China, Russia, Germany, the UK and France was presented last month to try to persuade Iran to halt work they fear is aimed at making weapons.