Crude prices surge in early trade, hitting a seven and a half month record due to increasing tensions between Iran and the West.

April 17, 2006: 8:07 AM EDT


LONDON (Reuters) - U.S. crude oil prices hit $70 on Monday, the highest level for nearly eight months, as Iran's pursuit of its nuclear program heightened fears the U.S. might take military action against the oil-producing nation.

U.S. light sweet crude was trading 50 cents higher at $69.80, off a session high of $70.

The session peak was the highest since Hurricane Katrina battered oil infrastructure in the U.S. Gulf Coast and drove U.S. crude to a record of $70.85 on August 30 last year.

http://money.cnn.com/2006/04/17/markets/oi...

Now here is what gets me. There seems to be some clear double talk coming out around all of this. Some is blamed on the tension with Iran, and some on shortfalls coming from Nigeria.

The article states:

"Analysts say the loss of high quality Nigerian crude will become more and more of an issue as the U.S. driving season, which begins in May, approaches.

"Light sweet crude is particularly sought after by refiners during the spring and summer as it provides a high yield of gasoline," said Mike Wittner of investment bank Calyon.

He added the Nigerian shortfall could not be made up for by the world's largest oil exporter Saudi Arabia, whose spare capacity is heavy, sour and more difficult to process."



They are talking shortfalls on the supply side, but then OPEC says:

"On production there is nothing we can do. We are already producing at maximum output," Qatar's Oil Minister Abdullah al-Attiyah said. "There is no shortage in supply."

No shortage, producing at maximum? Hmmmmm...

and then to highlight this further, anotehr OPEC official states:

"A senior OPEC delegate also said Monday the producer group was unlikely to change current production levels "as things stand" and that supplies were adequate to cope with unexpected shortages or rising demand."

How could they change current production levels if they are already producing at maximum?

Seems no one wants to indicate there might be an issue with meeting demand. Why that might mean we are peaking in our oil supply.

Olafr