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Commodities: Venezuela threatens to cut off oil supplies to US

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Date: Tuesday 12 Feb 2008

LONDON (ShareCast) - Venezuela’s President Hugo Chavez has threatened to cease supplies of oil to the US, in retaliation for the court move by US oil giant Exxon to freeze Venezuela’s assets.

The news sent the crude oil price racing higher for the third day in succession, despite worries over a possible economic slowdown dampening demand for oil. Crude oil for March delivery hit an intra-day high of $94.72 in New York before easing to close at $93.59.

News that Valero Energy had temporarily shut down its Delaware refinery because of a power failure on Sunday also boosted sentiment.

As the price of energy rose, so investors piled into gold futures as a hedge against inflation. At one stage the April futures contract hit $931, its highest level since the first day of the month, but profit-takers moved in to pare gains.

The yellow metal’s appeal was limited by a statement issued after the Group of Seven officials meeting in Tokyo in support of the International Monetary Fund’s decision to sell its gold reserves. The IMF is looking to reinvest in higher yielding assets.

Silver futures moved ahead strongly, continuing the metal’s good run; silver has risen by 17% this year.