Crude prices hold steady in Asian trading

01-May-06

Iran's top nuclear negotiator declared that his country was "allergic to the suspension" of uranium enrichment, and the country's President insists that Iran was within its rights under the Nuclear Nonproliferation Treaty to enrich uranium to fuel reactors for electricity generation - Iran continues to defy an expired deadline to cease enriching uranium and oil supply concerns continue to mount. In Singapore, light, sweet crude for June delivery dropped to US$71.85 a barrel in electronic trading on the New York Mercantile Exchange. Prices are being supported by tight U.S. gasoline supplies, strong global demand and supply disruptions by separatist rebels in Nigeria. Crude oil prices are about 40% higher than a year ago. But accounting for inflation, prices are still about 20% below the peak levels of 1981, after a revolution in Iran and a war between Iraq and Iran. Though the UN report paves the path for the council to take penalizing measures against Iran, immediate action seems delayed as veto-holding members Russia and China are opposed to punishing international sanctions. Although it seems unlikely that Iran will halt oil exports as a political tactic, a possibility that if the dispute escalates, it could likely send oil prices higher is feared. USA and its European allies have pressed the possibility of sanctions. USA would probably seek a U.N. resolution requiring Iran to comply with demands that it stop enriching uranium. Rice mentioned a resolution under Chapter 7 of the U.N. Charter, which means it can be enforced through penalties or military action.