Crude Jumps on Speculation of Iran Conflict, Which U.S. Denies
By Gavin Evans and Mark Shenk
March 27 (Bloomberg) -- Crude oil in New York rose in electronic trading on speculation of a confrontation in the Persian Gulf between U.S. or British forces and Iran.
``The rumor is that the Brits went in for a rescue attempt on the Royal Marines and Navy guys,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach California, referring to 15 British military personnel seized by Iran on March 23. ``And we don't know if that's true.''
Prices erased most of their after-hours gain after the White House, State Department and the head of the U.S. command that oversees military operations in the Middle East, said they had no information about a naval incident between Iran and the U.S.
Crude oil traded at $64.12 a barrel at 6:24 p.m. in New York Mercantile Exchange electronic trading, up $1.19 from the day's settlement price of $62.93. The settlement price is set after the close of floor trading at 2:30 p.m. New York time. Transactions after 6 p.m. are considered part of the next-day's trading.
Five trades were done between $68 and $68.09 a barrel just before 5 p.m., for the highest intraday price since September.
``Right now the buyer of those barrels may not be very happy,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston.
U.K. Prime Minister Tony Blair said earlier that efforts to release the British personnel seized by Iran will enter a ``different phase'' if negotiations fail. The incident occurred as Iran fended off international pressure to suspend its nuclear program.
No Conflict
Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina, said that in addition to speculation that the British were staging a rescue effort for their personnel, there was concern that a U.S. ship might have been fired upon by Iran.
``There seem to have been some whisper rumors about some potential Iranian strike on a U.S. ship,'' said Schenker.
U.S. Navy Commander Kevin Aandahl, spokesman for the Fifth Fleet in Bahrain, said there is no U.S. military activity in the Gulf outside of previously scheduled exercises. ``I've seen this happen before where there's a totally unsubstantiated rumor'' that has an effect on world markets, he said.
The Pentagon announced today that the aircraft carrier USS John C. Stennis and its strike group entered the Persian Gulf to conduct the exercises with the USS Dwight D. Eisenhower carrier strike force.
In Washington, State Department spokesman Tom Casey said, ``We are aware of no incidents of any kind involving U.S. and Iranian forces.''
National Security Council spokesman Gordon Johndroe said he wasn't aware of any incident involving U.S. and Iranian forces.
`Nervous'
``The reaction shows that we're nervous and not prepared for a military confrontation with Iran,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``We haven't priced in the risk of a war after all.''
Brent crude oil for May settlement rose 19 cents, or 0.3 percent, to close at $64.60 a barrel on the London-based ICE Futures exchange, the highest close since Dec. 1.
Iran has the second-biggest proved oil reserves. Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. The surrounding region, the Middle East, is responsible for almost a third of the world's oil output.
Iran's Foreign Ministry said the dispute over the detention of the British sailors and Marines by the Islamic republic will be solved in a ``calm'' manner, without specifying how long it may take.
``The issue will be solved in a calm atmosphere,'' said Mohammad Ali Hosseini, Iran's Foreign Ministry spokesman, in a phone interview today from Tehran. ``We cannot predict how long it will take to resolve the case.''
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net .
Last Updated: March 27, 2007 18:54 EDT
