Crude oil trades near US$100 on concern Iran may respond to European embargo
Source: BI-ME with Bloomberg , Author: Posted by BI-ME staff
Posted: Tue January 24, 2012 11:12 am

INTERNATIONAL. Oil traded near US$100 a barrel in New York on concern that Iran may respond to a European embargo on its crude exports by following through on threats to disrupt shipping in the Gulf.

EU foreign ministers agreed to ban supplies from the Islamic Republic starting July 1 to pressure the country over its nuclear program.

Iranian officials have said that in response they could close the Strait of Hormuz, an access route for 20% of the world’s oil. Prices were little changed today, following assurances by Saudi Arabia to keep customers adequately supplied, and signs of rising supplies in the U.S.

“The Iranian crisis is masking underlying weakness in market fundamentals,” Andy Sommer, a senior trader at EGL AG in Dietikon, Switzerland, who says the price of Brent crude should be US$5 a barrel lower, told Bloomberg. “We have increasing supply from places like Libya, while U.S. oil demand numbers look pretty weak, and Europe is the weakest link.”

Crude for March delivery rose as much as 60 cents to US$100.18 a barrel and was at US$99.80 at 9:10 a.m. London time. It settled at 99.58 yesterday, the highest since Jan. 19. Brent oil for March settlement was at US$110.67 a barrel, up 9 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at US$10.87 today, compared with a record US$27.88 on October 14.

The EU will freeze the assets in Europe of the Iranian central bank as well as eight other entities and ban the trade in gold, precious metals, diamonds and petrochemical products from Iran, the 27-nation bloc said in a statement yesterday. Europe is the second-biggest buyer of Iran’s oil after China.

The Strait of Hormuz is a transit route for about 17 million barrels of oil a day, according to the U.S. Department of Energy. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Qatar and Kuwait ship crude, oil products and liquefied natural gas through the channel. Iran will close the waterway if sanctions impede the sale of its oil, state-run Fars news agency said yesterday, citing Mohammad Kowsari, deputy head of the parliament’s National Security and Foreign Policy commission.

The ban on imports was a “hasty decision” that will drive up prices and threaten economic growth in Western countries, the Iranian oil ministry said in a statement published on the website of the state-run Fars news agency yesterday.

“The market is taking its breath to see what will happen next with Iran,” said David Lennox, an analyst at Fat Prophets in Sydney. “You would have thought with the embargo coming out of the euro zone that the oil price would have been somewhere around US$115 but it hasn’t happened.”

U.S. oil inventories probably grew last week on expectations of a rebound in Gulf Coast imports, a Bloomberg News survey showed. Supplies rose by 1.5 million barrels, or 0.5 percent, to 332.7 million last week, according to the median estimate of 10 analysts polled before a weekly Energy Department report on Jauary 25.

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