Crude Oil Rises

Oil rose, extending this year's 48 percent gain, after ABC News reported Israel is increasingly likely to attack Iran this year, starting a conflict that would threaten supplies from the Middle East.

Israel may bomb Iran if OPEC's second-largest producer acquires enough enriched uranium to build a weapon, the report said, citing an unidentified Pentagon official. Oil also gained as BP Plc said Russian government pressure on staff at its TNK- BP unit may hurt production and the IEA warned that spare OPEC capacity will shrink by 2013.

Crude oil for August delivery rose as much as $2.95, or 2.1 percent, to $142.95 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $142.67 a barrel at 1:34 p.m.

Yesterday, it touched a record $143.67 before retreating to settle 21 cents lower at $140 a barrel. The price climbed 38 percent between April and June, the biggest quarterly increase in nine years.

The U.S. won't allow Iran to shut the Strait of Hormuz, through which about 40 percent of Middle East oil is shipped, a spokesman for the Fifth Fleet said yesterday. Among the Organization of Petroleum Exporting Countries only Saudi Arabia produces more than Iran.

The fleet's comments were in response to remarks by the head of Iran's Revolutionary Guard two days ago that his country may close the strait if attacked by Israel.

Brent crude oil for August settlement climbed as much as $3.31, or 2.4 percent, to $143.14 a barrel on London's ICE Futures Europe exchange and was trading at $142.85 at 1:35 p.m. London time.

The contract fell 48 cents, or 0.3 percent, to $139.83 a barrel yesterday, after reaching a record $143.91., Bloomberg
7/1/2008 6:27:30 AM