Transcripts

Crude Prices Get Pumped Up

PAUL KANGAS: Oil was back in the spotlight on Wall Street today, as crude surged back above $72 a barrel. Spurring the rally, concern about Iran`s nuclear ambitions, strong demand from China, and the upcoming hurricane season. As Erika Miller reports, analysts say it`s likely crude prices will head even higher.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Traders yelled and waved, eager to buy and sell oil futures as they shot to their highest level in 2 1/2 weeks. Light sweet crude for July delivery closed at $72.03 a barrel, up $0.66. Worries about crude supply from Iran sparked the rally. Tensions have been escalating between the west and Iran over that country`s nuclear ambitions. On Thursday, the five permanent members of the U.N. Security Council and Germany are expected to meet in Vienna to negotiate incentives and penalties to persuade Iran to abandon its uranium enrichment program.

OHN KILDUFF, ENERGY ANALYST, FIMAT USA: I would say Iran as a situation is worth probably around $8 to $12 a barrel. I say that because if there was a diplomatic breakthrough announced in the coming days, you would see crude oil prices fall precipitously, based upon an easing of those tensions.

MILLER: Thursday is also the official start of the hurricane season, adding to supply concerns in the marketplace. It has been nine months since hurricanes Katrina and Rita hit the Gulf coast and more than 20 percent of the region`s oil production still remains offline. Also on Thursday, OPEC ministers will meet in Caracas, Venezuela, to set production quotas, but most traders don`t expect any major changes.

RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: It seems like the agreement will be rolled over. I don`t anticipate a production hike. If it is, it will be minimal. Production cut probably not going to happen.

MILLER: Many industry experts predict oil prices will continue to rally this summer. They point out that worldwide demand remains strong, even in the face of high energy prices. That`s especially true for China and the U.S. which just started the summer driving season. Oil prices have surged about 18 percent this year. They traded above $75 a barrel last month and some experts expect prices to soon pass that level.

KILDUFF: I think we`ll see new record high prices probably this week. Beyond that, it`s going to be, I think, the first storm of the season, the first hurricane or tropical storm that makes its way into the Gulf of Mexico that will get us I believe over $80 a barrel.

MILLER: There`s one more thing oil markets will be paying close attention to Thursday. That`s the government`s weekly oil inventory data. Erika Miller, NIGHTLY BUSINESS REPORT, New York.