Iran tensions push up oil price

Fears of supply crunch and hopes of stimulus combine to send up price of barrel of crude

The global oil price spiked upwards yesterday as fears grew of a looming conflict between Israel and Iran and constraints on supply started to bite.

Brent crude rose in trading by $2.16 to hit $115, the highest since May.

Israeli newspapers reported at the weekend that the Prime Minister, Benjamin Netanyahu, is close to ordering a military strike on Iran's nuclear facilities, and on Sunday the country's deputy foreign minister said the diplomatic effort to halt the Tehran regime's enrichment of uranium should now be declared dead. Iran has threatened to close the Strait of Hormuz, through which 40 per cent of the seaborne world's oil supplies pass, if it is attacked by Israel.

The supply of oil has also been constrained of late by a slowdown in North Sea production. Output from the 12 North Sea streams is set to fall by 17 per cent next month thanks to maintenance and natural decline.

The Brent oil price fell to $90 in June, having hit $125 in the spring. But the price has been rising ever since.

The future path of oil prices is complicated, however, by signs of slowing demand. Last week the International Energy Agency cut its 2013 production forecast by 400,000 barrels per day, citing the global economic slowdown.

That is reinforced today by the Centre for Economics and Business Research (CEBR), which has slashed its forecast for global growth in 2013 to 2.7 per cent, down from the 3.2 per cent it expected in April.

Some analysts said yesterday that the weakening global growth outlook might prompt the monetary authorities in the US, China and Europe to do more to boost growth, which would prop up global energy prices.

"Hopes of a stimulus are underpinning prices for oil and other commodities markets" Carsten Fritsch of Commerzbank said.

The Bank of England voted to pump a further £50bn into the UK economy in July and the European Central Bank and the People's Bank of China cut interest rates in the same month.

The chairman of the Federal Reserve, Ben Bernanke, has signalled that he is prepared to do more to support the US economy should the outlook weaken. There were reports yesterday of hedge funds placing bets on a rise in the oil price. A weekly report by the US Commodity and Futures Trading Commission showed fund managers' net long positions on crude rising by up to 20 per cent in the week to 7 August.

The CEBR forecasts that annual growth in China will slow to 7 per cent by 2016, well below the average rate over the past decade.

The think-tank says that annual growth in India will fall to 6 per cent in 2013. In the Middle East the CEBR sees growth falling to 3.4 per cent and in Africa to 4.6 per cent. For the US, it is expecting growth in 2013 of 1.7 per cent.

The eurozone is seen as contracting by 0.1 per cent, following a 0.8 per cent decline this year.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own