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Oil Calms. August 22, 2006

Posted by Bhavin in Uncategorized.
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Oil prices were calm Tuesday ahead of Iran’s formal response to a U.N. plan meant to encourage it to suspend uranium enrichment, although Tehran has already indicated it would not do so.

Light sweet crude for September delivery rose 4 cents to $72.49 a barrel in electronic trading on the New York Mercantile Exchange.

In other Nymex trading, gasoline futures rose 0.24 cent to $1.939 per gallon. Natural gas futures dropped 12.4 cents to $6.50 per 1,000 cubic feet and heating oil futures fell marginally to $2.0325 per gallon.

The U.N. Security Council passed a resolution last month calling for Iran to suspend by Aug. 31 uranium enrichment, which can be used to create the fissile core of warheads, or face the threat of economic and diplomatic sanctions.

Iran has said it will respond by Tuesday. But on Monday, its Supreme Leader Ayatollah Ali Khamenei said Tehran will pursue nuclear technology despite the U.N. Security Council deadline. In Austria, diplomats and U.N. officials said Iran has turned away U.N. inspectors wanting to examine its underground nuclear site in an apparent violation of the Nuclear Nonproliferation Treaty. The officials spoke on condition of anonymity.

Elsewhere in the Middle East, a cease-fire in Israel and Lebanon was in its seventh day, although Israel on Saturday conducted a pre-dawn commando raid deep into Lebanon’s eastern Bekaa Valley, prompting U.N. Secretary-General Kofi Annan to declare the Israelis in violation of the Security Council truce resolution.

Oil prices had hit a record high of $78.40 a barrel on July 14, two days after fighting erupted in Lebanon.

They fell back last week as supply fears abated after the cease-fire in Lebanon and BP PLC restored half of the production at the Prudhoe Bay oil field in Alaska, which was disrupted earlier this month because of pipeline corrosion. On Friday, prices dipped below $70 a barrel during day trading for the first time in almost two months before regaining ground and closing at $71.14.

Traders are also concerned about potential hurricanes that could strike Gulf of Mexico production and refining facilities.