Oil price falls back from 43-month high

Oil prices have dipped from a 43-month high after Saudi Arabia denied reports that a key pipeline had exploded.Brent crude fell back to $124.9 a barrel after jumping almost $6 to $128.40 in New York on Thursday. US light crude fell slightly to $107.9.A number of factors had pushed prices to their highest level since July 2008, including tensions over Iran's nuclear plans and regional unrest.

Thursday's high beat the level seen during the Libyan civil war last year.

'Market nervousness'

The problem facing the oil market at the moment is that events in a number of countries could have an impact on supply and demand, often causing traders to react more quickly to speculation and increasing volatility.

On Thursday, the trigger was a report in Iranian media that an explosion had occurred at a pipeline in Saudi Arabia.

The report came at a time when there has been a steady increase in friction between Iran on one side and the United States and its allies on the other. The US has imposed fresh sanctions against Tehran targeting the country's oil exports, while the European Union has announced a ban on imports of Iranian oil.

For its part, Iran has threatened that it will close the Straits of Hormuz, a vital trade route for oil from the Gulf - including Saudi oil - if the West were to impose more sanction.

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Analysts said all these issues had created an uncertainty over oil supplies and the latest reports had only fanned those fears further.

"The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems," said Gene McGillan of Tradition Energy.
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