Sunday, June 04, 2006

Oil surges on Iran warning to U.S.

CNN News:
Oil prices have surged above $73 after Iran's supreme leader warned the United States that any "misbehavior" directed at his country could endanger oil movements in the Persian Gulf.

Ayatollah Ali Khamenei's remarks were seen as a threat that Iran might use oil as a weapon in its nuclear dispute with the West. READ MORE

U.S. crude jumped $1.15 to $73.48 a barrel on Monday -- the highest level in three weeks -- before easing back to $73.10. Brent crude, meanwhile, rose 98 cents to $72.01 in London.

Khamenei said Sunday the United States "should know that the slightest misbehavior on your part would endanger the region's energy security," he said, referring to shipments that pass through the strategic Strait of Hormuz near Iran and other countries. (Full story)

About 17 million barrels a day -- 20 percent of the world's daily needs -- leave the Gulf region via oil tankers using the narrow passageway.

"In order to threaten Iran, you say that you can guarantee movements of oil through this region," he said.

"You are not capable of guaranteeing energy security in this region."

Khamenei did not specify what he meant by disruption or misbehavior.

"If you, the United States, make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered. We are committed to our national interests, and whoever threatens it will experience the sharpness of this nation's anger," he said.

U.S. Secretary of State Condoleezza Rice deflected concerns about the remarks.

"We're not going to react to every statement that comes out of Iran," she told CNN's "Late Edition" on Sunday.

"The oil card -- well, let's just remember that Iran is some 80 percent dependent on oil in its budget" and would be unable to handle a disruption, she said.

Oil prices have also been boosted by production problems at U.S. refineries at the start of the peak northern summer driving season.

Iran is embroiled in a standoff with the West over its nuclear ambitions.

Although Washington has no diplomatic relations with Iran -- which U.S. President George W. Bush branded part of an "axis of evil" -- the United States last week agreed to join European allies in negotiations with Tehran if Iran suspends its uranium enrichment program and resumes full cooperation with the International Atomic Energy Agency.

The Islamic republic says it wants to pursue nuclear power for peaceful purposes, but the United States and the European Union believe it harbors aspirations to be armed with nuclear weapons.

Six world powers -- Germany and the five veto-wielding members of the U.N. Security Council -- last week agreed on a package of incentives if Iran stops uranium enrichment, or penalties if it refuses.

The European Union's Javier Solana is set the deliver the package to Iranian officials in Tehran on Tuesday. (Full story)