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Commodities: Middle East tensions push oil higher

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Date: Tuesday 26 Feb 2008

LONDON (ShareCast) - Continuing fears about events in Iraq and Iran pushed oil prices higher in a volatile trading session.

Last week Turkey mounted a raid into northern Iraq, raising concerns that the country’s crude pipeline to the Turkish port of Ceyhan could be put out of action. Meanwhile, those nations that expressed support for the idea of sanctions against Iran in protest at its alleged nuclear weapons development programme are reportedly facing reprisals from Iran.

The price of the April crude oil futures contract stopped shy of breaking through the $100 barrier, rising 42 cents to $99.23, as demand was constrained by concerns over the US economy’s growth prospects. US existing home sales data showed a 0.4% fall in January to the lowest level since 1999, when the National Association of Realtors started compiling the sales statistics.

On the metals exchanges, gold, platinum and copper prices retreated but silver and palladium became more expensive.

The appeal of gold was undermined by a rise in the value of the US dollar and also by the news that the US Treasury has no objection to the proposed sale of some of the gold reserves held by the International Monetary Fund (IMF). The sales are due to start in April, though the US Congress could overturn the Treasury’s decision to support the IMF plans; Congress has previously opposed IMF proposals to sell gold in 1999 and 2005.

Any sale by the IMF would be limited to 500 tonnes of gold a year, as per a European central bank accord on gold sales. The IMF is the world’s third largest holder of bullion reserves, with 3,217 tonnes in its vaults.

The April futures contract slipped $7.80 to $940.00 an ounce in New York.