Oil hits record high on Mideast worries

Traders fear that Israel-Lebanon conflict will spread through region, hurt supply

Associated Press / July 14, 2006

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WASHINGTON -- Oil prices settled at a record above $76 a barrel yesterday in a market agitated by escalating violence in the Middle East and the threat of supply disruptions there and beyond.

The latest surge in oil shook stock market investors' confidence, though economists said most US consumers and businesses appear to be absorbing higher energy costs surprisingly well.

US gasoline demand continues to rise in spite of $3-a-gallon pump prices.

``Two years ago I might have said that $70 or $75 a barrel would be some kind of a tipping point. Now I'm not so sure anymore," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.

Light sweet crude for August delivery rose as high as $76.85 a barrel on the New York Mercantile Exchange before settling at $76.70.

The rally came as fighting between Israel and Lebanon intensified, explosions hit Nigerian oil installations, and a diplomatic standoff dragged on between the West and Iran over its nuclear program.

The previous Nymex settlement record of $75.19 was set July 5. The previous intraday record of $75.78 was posted two days later.

Currently, oil prices are being pushed higher by rising global demand and worries that the world's limited supply cushion would not be adequate to offset a lengthy disruption to output in major producing countries, such as Iran or Nigeria.

The latest fear being priced into the market is that the Middle East conflict between Israel and Lebanon could spill over into other corners of the Middle East, the region that produces nearly a third of the world's oil.

Latest news:
From today's Globe:
 Fighting rises across Israel, Lebanon line (By Anne Barnard, Globe Staff)
Pop-up GLOBE GRAPHIC: Cross-border attacks
 Hezbollah strenghth could hurt standing (By Anthony Shadid, Washington Post)
 As crises erupt, sea change seen in Bush foreign policy (By Farah Stockman, Globe Staff, 7/14/06)
 Oil hits record high on Mideast worries (Associated Press, 7/14/06)