BP oil drilling rig in Gulf of Mexico

The price of light crude oil rose above $78 a barrel in New York for the first time as rising violence in the Middle East and damage to Nigerian pipelines threatened global supplies.

Israel's air force attacked targets in Lebanon for a second day reinforcing a blockade of the country by cutting the Beirut-Damascus highway , retaliating against rocket strikes by Hezbollah militants, who are backed by Syria and Iran. Sabotage on two pipelines on Thursday forced Italy's Eni SpA's Nigerian venture to reduce output, the Lagos-based Guardian newspaper reported.

Crude oil for August delivery rose as much as $1.70, or 2.2 percent, to $78.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange (NYMEX). It was at $78.05 at 7:55 a.m. in Dublin, a 28 percent rise so far this year.

The following  is today's Oil & Emissions Update from Paul J. Harris, Head of Energy & Emissions, Bank of Ireland Global Markets: 

Oil

Brent crude soared to a new high of $77.76/bbl this morning on intensifying tensions in the Middle East. The Israeli offensive into Lebanon moved up a gear with the destruction of the Lebanese airport and the completion of a sea blockade. Overnight a seris of attacks were carried out even as appeals for calm from the US and condemnation from Russia & China were lodged. This violence has eclipsed the drop in US inventories, Iranian nuclear dispute and the further disruption to Nigerian production.

Ominously the Iranian president warned that an attack on Lebanon by the Israelis would be deemed an attack on the Islamic world - this might refocus the markets on the Iranian nuclear dispute in the context of the Israeli attacks & inject a greater sense of urgency into the UN processes. This in turn may hasten the Iraqis into disrupting world supply should sanctions be imposed against them.

Friday brings with it the sense that further actions over the weekend will see prices higher again. Consequently traders will be keen to maximise their long positions at a time when there seems good prospects of further gains. $82.20 represents the inflation-adjusted all-time high of crude and it is beginning to be talked about as an achievable target if conditions persist.