Crude Oil Falls as Iran Responds to Offer on Nuclear Program

Grant Smith
Bloomberg
Friday, July 4, 2008

July 4 (Bloomberg) — Crude oil fell from near a record after Iran said it gave a “constructive” response to incentives intended to persuade the nation to stop uranium enrichment.

A compromise may allay concern that Israel is ready to attack Iran’s nuclear installations, starting a conflict likely to cut supply from OPEC’s second-largest oil producer. Futures climbed to a record $145.85 a barrel yesterday on speculation tension in the Middle East may worsen.

“For both sides to show they can give up something could calm down political risk in the area,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. Prices may “in the immediate term drop one or two dollars” if a compromise is reached.

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Crude oil for August delivery fell as much as $1.41, or 1 percent, to $143.88 a barrel in electronic trading on the New York Mercantile Exchange, and was at $144.50 as of 3:46 p.m. London time.

The government in Tehran has prepared and presented its reply “with a focus on common ground and a constructive view,” state television cited Saeed Jalili, secretary of Iran’s Supreme National Security Council, as saying today in a telephone call with European Union foreign policy chief Javier Solana.

Tensions with Iran, which borders the Straits of Hormuz waterway used to channel 20 percent of world oil supply, may still send oil to $200, according to independent energy adviser Cornelia Meyer.

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