Crude Oil Prices Top $79 as Middle East Violence Escalates

By Alan Fein

New York - Wall Street is building into two houses; those that believe fighting in the Middle East will escalate and those that are praying for peace. But regardless of which school of thinking you fall under, supply concerns over raw commodities like crude oil pushed prices to record-setting highs for the third day in a row.

In New York, crude oil for August delivery reached a high of $79.45 in late morning trades before settling back to $79.15 by 10:15am ET Friday after reports of further Hezbollah rocket attacks on Israel Friday hit commodity trading pits.

In London, Brent crude oil climbed $2.32 per barrel to $76.70. Heating oil rose 3 cents per gallon to $2.11, while unleaded gasoline matched distillate fuel's rise trading up 3 cents per gallon at $2.33 for new record highs.

The Jerusalem Post reported that Friday afternoon, Israel time, Hezbollah militants launched rocket attacks out of Lebanon on the cities of Safed and Nahariya on the Northern border with Lebanon. The Post claims over 700 Katyusha rockets have been thrown at Israel so far. U.S. media put the figure at more like 100. But regardless of the number of Hezbollah attacks, the barrage of violence continues.

Yesterday from Germany President Bush said, "Israel has a right to defend itself." Today, armchair experts on Fox News, MSNBC and others are all saying it's Iran's fault for being the financial backers of the terrorist Hezbollah militants and Hamas with most of the training and hosting taking place in Syria.

The price of OPEC basket of eleven crudes stood at $70.38 a barrel on Thursday, compared with $68.66 the previous day, according to OPEC Secretariat calculations. The weekly average OPEC basket price has risen from $63.45 per barrel on June 23rd to current $70 levels as geopolitical pressures build in the Middle East.

This morning OPEC released a statement from Vienna Austria "assuring the market of its continuing commitment to order and stability, to the benefit of producers and consumers alike." But its emphasis is on "producers benefiting" more than consumers, especially in the United States and Europe.

Geopolitical developments have come at a time when the market was already out of line with today's supply and demand fundamentals, with speculation playing a significant role in driving up crude oil prices.

OPEC pointed out that OECD stocks are above their five-year average levels and that that the market remains well-supplied in excess of demand. Yet it's OPEC members that have raised the price of their crude oil over 10 percent in less than a month.

Iran is a major OPEC member oil producer and many of the cartel's other Middle East members are sympathetic toward Hezbollah and Hamas militants from a standpoint of wanting the attacks on innocent civilians to end. To them, they see Israel's military actions as an attack on their people. To the Israelis, they see the militants' actions as being fueled by a fanatic Iranian leadership. Meanwhile, the price of crude oil and gasoline rises.