LONDON — Oil rose to a new peak of $75 a barrel yesterday as investment funds snapped up crude futures and tension mounted over Iran’s nuclear intentions.
U.S. light oil for June delivery CLc1 was up $1.31 at $75 a barrel at 1848GMT while London Brent LCOc1 was up $1.16 to $74.34.
U.S. oil has rallied about $14 this year on supply concerns and as investment funds pour billions of dollars into commodities as they look for high returns among diverse assets.Funds stepped in again yesterday, fuelling a recovery from early profit-taking.“It’s turned around, and it seems to be related to the injection of capital that we believe is coming from pension and mutual funds,” said Deborah White of SG CIB Commodities in Paris. “All week it has been like this, a cross-commodities rally.”Base metals markets also raced to record highs yesterday.Investment funds were testing how high the oil price would go before demand suffers, Bank of America analyst Richard Savage said.“We haven’t seen significant demand destruction,” he said. ”The key thing here is that high prices are not due to fundamentals. The market is trying to find that break point.”High prices have yet to halt oil demand growth in the United States or in fast-growing China.A war of words between Iran and the West over Teheran’s resolve to continue its nuclear programme has triggered concern that oil supplies from the world’s fourth biggest exporter could be disrupted.The Iranian president said yesterday that Iran should rely on domestically produced gasoline starting in September, a move that would make the country less vulnerable to sanctions.A senior U.S. official said yesterday that Russia must stop any arms deals with Iran. Washington wants Moscow to cancel the planned sale to Iran of surface-to-air missiles.Russia strongly opposes the use of sanctions against Iran. Iran scoffed at the idea of U.S. military action to halt its nuclear activities.