IPE Brent rangebound despite further tensions in the Middle East

IPE Brent rangebound despite further tensions in the Middle East

London (Platts)--1Aug2006

IPE Brent futures in London traded rangebound Tuesday after yesterday's
heavy gains despite continued violence between Israel and the Lebanese
Hezbollah militants and Iran's response to the UN Security Council resolution
ordering the nation to freeze sensitive nuclear work by the end of the month.
At 1003 GMT, September IPE Brent futures were trading at $75.40/barrel,
up 25 cents from the overnight settle.
On Monday, the global petroleum complex rallied on the back of the loss
of 600,000 b/d of Nigerian production, escalated violence in the Middle East
over the weekend and soaring natural gas prices resulting from a heat wave
across the US.
With the tightening of crude supply in the Atlantic Basin, IPE Brent
futures intermonth spreads have strengthened as well as front-month Brent
trading at a significant premium to NYMEX WTI crude.
"The recent loss of 210,000 b/d of Nigerian Bonny Light has significantly
tightened the Atlantic Basin light sweet crude material," Calyon head of
energy market research Mike Wittner wrote in a report. "The Brent forward
curve has flipped into backwardation and Brent has been driven to an unusual
premium over [NYMEX]," he added.
Currently the September-October intermonth Brent futures spread is near
parity whilst September IPE Brent has traded at over 80 cents above the
corresponding September WTI futures contract. The current spread implies a
closure of the Europe/West African crude arbitrage into the US.
Production in August for the six main North Sea grades of Brent, Forties,
Oseberg, Ekofisk, Statfjord and Gullfaks is scheduled to decline by 301,500
b/d to 1.802 million b/d.

IRAN REACTION TO UN SECURITY COUNCIL DEADLINE
Iran has reacted angrily to a UN Security Council resolution called UN
Resolution 1696, which dangles the threat of sanctions unless Iran halts
uranium enrichment and other work that could help build a nuclear bomb. Iran's
UN ambassador Javad Zarif described the action as "destructive and totally
unwarranted."
"I would suggest to you that this approach will not lead to any
productive outcome. It can only exacerbate the situation," Zarif told the UN
Security Council, AFP reported.
The Security Council gave Tehran an August 31 deadline to comply, and
said that International Atomic Energy Agency chief Mohammed ElBaradei should
then report back on what Iran has done to fall into line.
But the text of the resolution held off from an immediate threat of
sanctions, which have been opposed by Russia and China, and said any punitive
action would have to be the subject of further discussions.
Iran insists it only wants to enrich uranium to make reactor fuel and
that this is a right enshrined by the nuclear Non-Proliferation Treaty.
Demands for a suspension stem from widespread suspicions the country wants the
capacity to make weapons-grade uranium.

ISRAELI OFFENSIVE AGAINST HEZBOLLAH
Israel approved the expansion of its ground offensive in Lebanon on
Tuesday, dashing hopes of an early end to the conflict despite global outrage
over an attack that killed at least 52 civilians, AFP reported.
"There is no ceasefire and there will be no ceasefire in the coming
days," Israeli Prime Minister Ehud Olmert declared.
Israel's security cabinet gave the green light Tuesday to widen its
ground offensive in the three-week old war on the Shiite Muslim Hezbollah that
has killed well over 500 people and left much of Lebanon's infrastructure in
ruins.
Also, despite a promised 48-hour halt in air raids which allowed
thousands of southern Lebanese to flee the war zone, Israeli warplanes struck
roads leading to Syria in the early hours of the morning, Lebanese police
said.

TROPICAL STORM CHRIS OFF COAST OF WEST INDIES
The US National Hurricane Center have said that Tropical Storm Chris has
formed near the West Indies, packing sustained winds of nearly 40 miles/hour.
Tropical Storm Chris is currently around 175 miles east of Antigua, and is
moving north-northwest at nearly 9 miles/hour.
"Some strengthening is forecast during the next 24 hours," the NHC said
in its 5.00 am EST (0800 GMT) update.
However, London-based gasoline traders have noticed a reduction in
gasoline crack prices and have said that the fall is due to the diminished
hurricane risk. Earlier in the year forecasters expected another heavy
hurricane season similar to 2005.
"I haven't even heard the word 'hurricane' mentioned in the last four
weeks," said one London-based trader.

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