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Friday, July 14, 2006

Oil Surges To Record High of $76

By Yaser Anwar, CSC of Equity Investment Ideas

Oil has soared to a record high of $76 - the result of troubling news coming in from all around the globe.

Israel and Lebanon are warring with each other, while North Korea continues to flaunt its nuclear capabilities, refusing to discuss its plans with neighboring South Korea and other nations. At the same time, Iran is attempting to develop its own nuclear program, while fighting in major oil producer Nigeria threatens to cut off the considerable supply from that country.

"Geopolitical tensions have stepped up - we are moving on to a new phase in Iran and Israel," Mike Wittner of investment bank Calyon tells Reuters. "In the end, geopolitical risk is about a current supply disruption getting worse or a new one happening."

In addition, U.S. crude inventories dropped to levels that were lower than anticipated, trading "at $76.35 a barrel, around 32 percent above a February low," according to the news service.

Experts expect oil to continue to rise, further hampering the economy.

"This is a market that is continuously looking for excuses to go down," Anthony Chan, chief economist for JPMorgan Private Client Services, told CNN. "When there's not much other news, it's going to look at oil or interest rates. Today I think oil prices and the Middle East tensions are causing a lot of nervousness."

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