New oil shock ahead as $100 spike looms

The growing international crisis over Iran's nuclear programme could trigger a catastrophic oil price spike, sending crude prices over $100 a barrel, senior Wall Street analysts are warning.

With prices already at around $72 a barrel, such an increase could mean drivers facing prices of 110p a litre on forecourts, according the the Petrol Retailers Association. Last week Lord Browne, chief executive of BP, warned that prices could rise to �1 as he unveiled bumper $5.27bn profits for the first quarter.

Shell is also expected to announce close to record numbers next week, with analysts expecting profits around $5.57bn, driven largely by the oil price.

A single political shock could be enough to send oil markets into panic, said Adam Sieminski, senior energy economist at Deutsche Bank in New York. 'If we have one more big problem we are going to have triple-digit oil prices.' Sieminski points to confrontation with Iran, a worsening of the situation in Iraq or a recurrence of devastating hurricanes in the Gulf of Mexico as potential catalysts for a major rise.

Prices rose by as much as $1.20 in late trading on Friday after the United Nations inspector Mohamed El Baradei said Iran had not complied with demands to disclose the extent of its uranium enrichment programme. Iranian President Mahmoud Ahmadinejad later said he 'did not give a damn' about the UN's opinion.

In a report, Sieminski argues that with the world consuming some 85 million barrels of oil a day, a supply disruption of 2 million barrels a day (60 per cent of Iran's exports) 'can only be rebalanced through an extraordinary rise in prices.'

But he believes any breaching of the $100 level would be short-lived, and that prices would fall to between $30 and $60 as increased investment brings new production and refining capacity on stream in oil-producing nations.

Mary Novak, managing director of energy services at consultants Global Insight, said Iran would not need to turn off the taps completely - even if it shut off just a 10th of its 3 million barrels a day of exports, the impact would be dramatic. 'With the situation we have, 300,000 barrels a day would drive prices up significantly,' she said, adding that with the global economy growing more quickly than expected this year 'demand is still expanding and supply is having trouble catching up'.

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