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Iran attacked and seized control of a Romanian oil rig working in its Persian Gulf waters this morning one week after the Iranian government accused the European drilling company of “hijacking” another rig.

An Iranian naval vessel fired on the rig owned by Romania’s Grup Servicii Petroliere (GSP) in the Salman field and took control of its radio room at about 7:00 a.m. local time, Lulu Tabanesku, Grup’s representative in the United Arab Emirates said in a phone interview from Dubai today.

“The Iranians fired at the rig’s crane with machine guns,” Tabanesku said. “They are in control now and we can’t contact the rig.” The Romanian company has 26 workers on the platform, he said.

Iran, which holds the world’s second-largest oil and gas reserves, is due to respond today to a European Union-led offer of incentives aimed at persuading it to halt uranium enrichment activities that are crucial to its nuclear program.

Neither the press office of Iran’s oil ministry nor the one of Iran’s revolutionary guards could be reached for comment when called. Today is a national holiday in Iran.

Crude oil for September was at $72.56 a barrel, up 11 cents, on the New York Mercantile Exchange at 12:06 p.m. in London. The contract expires today. The more-active October contract was up 7 cents at $73.37 a barrel.

Iran urged the United Arab Emirates last week to help it return another oil rig owned and operated by the Romanian company in the same waters close to the Straits of Hormuz, through which 20 percent of the world’s daily oil supply moves on tankers.

Grup said it recovered its rig last week because of a contractual dispute with its Iranian client, Oriental Oil Kish.

Iranian President Mahmoud Ahmadinejad suspended Oriental Oil’s activities in 2005 on alleged corruption activity and ties to Halliburton Co. of the U.S. The U.A.E.-registered drilling company had signed a preliminary contract with Halliburton after winning an estimated $310 million contract to develop phases 9 and 10 of Iran’s offshore South Pars gas reservoir.

Mircea Geoana, the head of the Social Democratic Party, the main opposition party in Romania, called on the government to “undertake all diplomatic measures necessary” to persuade the Iranians to release the rig.

He also called on President Traian Basescu in a news conference broadcast on Realitatea television to invite all political party heads to the presidential palace to “discuss what Romania’s reaction will be to this provocation.”.

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Kind of makes you wonder what this is all about.  Is Iran making a stand against the US or are they getting over confident now that they are the largest military power in the Middle East?  Iran is a scary country.

Oil fell for a fourth day on Thursday to the lowest in nearly eight weeks after U.S. data reminded traders that crude stocks are relatively robust and the summer driving season is nearing its end.

U.S. light, sweet crude for September delivery fell 61 cents to $71.28 a barrel, its lowest since June 26. London Brent was down 62 cents to $72.21 a barrel.

U.S. crude prices have shed more than 7 percent after falling for six of the last eight sessions as a ceasefire took hold in the Middle East and BP (BP.L: Quote, Profile, Research) decided to shut in only half of its 400,000 barrel-per-day (bpd) Prudhoe Bay oilfield.

Some dealers had feared the partial closure of the biggest oilfield in the United States might trigger a surprisingly large drawdown in this week’s crude inventories, but data on Wednesday showed a decline of 1.6 million barrels, in line with forecasts.

Crude stocks have fallen from the eight-year high reached earlier this year, but still remain higher than almost any time since 1999, giving refiners a sizeable supply buffer to guard against any unexpected disruptions.

Gasoline inventories dropped by a deeper-than-expected 2.3 million barrels, but demand eased from the previous week as the summer driving season, which ends in early September, began to wind down.

“It is this pace of demand deceleration, as well as the plentiful supplies of heating oil, that may set a more modest bearish tone to the market in the weeks after August,” said First Energy Capital analyst Martin King.

“WTI crude oil prices treading water more in the range of the very low $70s to very high $60s may be something that materialises, barring any hurricane-induced price spikes.”

Distillate stocks rose 800,000 barrels and heating oil supplies stand higher than a year ago, the data showed.

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Nice to see oil prices starting to stabilize after many weeks of oil and gas price increases.  I only hope that prices will fall below $70 a barrel.

Oil fell $2 to below $75 a barrel on Thursday after Britain said it had thwarted a plot to blow up aircraft in transatlantic flight (see snippet below for some details on that) and investors recalled the slump in fuel demand that followed 9/11.

Oil consumption would again be hard hit if travelers turn away from flights and consumer confidence takes a knock. Jet fuel prices in particular moved down sharply in the weeks after September 11, 2001 and after the SARS outbreak in 2003.

At 1645 GMT U.S. oil was down $1.95 at $74.40, off a low of $74.20. London Brent crude was down $1.72 at $75.56.

A strike against an already weakened airline industry, caused by the constantly escalating prices of fuel, would not only cripple air travel, re-awaken the fear and concern of the 9-11 attacks, but an attack of this nature and magnitude would also bring into question the worlds ability to protect itself from the terrorist element. Our congratulations to the law enforcement teams that successfully aborted this attack before it was carried out.

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BRITISH police have thwarted what they said was a plot to blow up aircraft flying to the US, causing “mass murder on an unimaginable scale”.

Twenty-one people were arrested and airports across Europe thrown into chaos after Britain’s security status was elevated from severe to critical - “imminent attack expected”. The US raised its status to “red” - the highest level - for flights from Britain.

US officials said the airlines targeted were United, American and Continental. A police source said up to 10 flights might have been targeted, the BBC reported.

The US Homeland Security Secretary, Michael Chertoff, said the plot was in its final stages of planning. It was “international in scope” and “in some respects suggestive of an al-Qaeda plot”.

Additional Information