Oil traders are right to be nervous

We've never subscribed to the view that last year's high oil price was a one off and that this year would see prices falling back to the $40 a barrel level. Instead, we've long been convinced that rising demand and limited supply would keep the price high regardless of political events, but that geopolitical tension might well push it much higher still.

By Annunziata Rees-Mogg

Published 20 February 2006 In Features

We've never subscribed to the view that last year's high oil price was a one off and that this year would see prices falling back to the $40 a barrel level.

Instead, we've long been convinced that rising demand and limited supply would keep the price high regardless of political events, but that geopolitical tension might well push it much higher still.

So far this year that seems to have been a reasonable stance. Osama bin Laden's latest warning, along with Iran's decision to remove assets from European banks in advance of any possible nuclear-related sanctions against it, have sent "shockwaves" through the oil markets, with the price of Brent oil in London shooting up $1.20 a barrel to reach $66.43, near last year's all-time high of $67.48, says The Daily Telegraph.

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