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Oil hovers below $103 as EU mulls Iran oil ban - Daily News Egypt

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Oil hovers below $103 as EU mulls Iran oil ban

Oil prices hovered below $103 a barrel Thursday as the European Union mulled a ban on oil purchases from Iran and a report showed mixed signs about US crude demand. By early afternoon in Europe, benchmark crude for February delivery was down 45 cents to $102.77 a barrel in electronic trading on the New York …


Oil prices hovered below $103 a barrel Thursday as the European Union mulled a ban on oil purchases from Iran and a report showed mixed signs about US crude demand.

By early afternoon in Europe, benchmark crude for February delivery was down 45 cents to $102.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 26 cents to settle at $103.22 in New York on Wednesday.

In London, Brent crude was up 1 cent at $113.71 a barrel on the ICE Futures exchange.
Traders are closely watching rising tensions between Iran and Western powers. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. and European economic sanctions. The US has said it will not tolerate such a move.

Additionally, EU officials were in talks Thursday looking to ban the purchase of Iranian oil among the bloc’s 27 countries with the aim of cutting off funding for the country’s nuclear program.

Iranian officials maintain the program is meant solely for peaceful purposes. But the international consensus is that it is aimed at building nuclear weapons.

Brent crude could temporarily jump to as high as $210 if the strait were closed, Capital Economics said.

"However, neither side would want tensions to spiral this far out of control," Capital Economics said in a report. "Indeed, the threat of another ‘super-spike’ in oil prices when the global economy is still so fragile is itself a very powerful reason for the West to hold off from any military action."

"By far the bigger risk is that oil prices will collapse due to an escalation of the financial crisis in the eurozone."

Capital Economics expects Brent to trade at $85 at the end of this year while Bank of America Merrill Lynch forecasts an average price of $108 in 2012.

According to a report from Commerzbank in Frankfurt, the EU imported 450,000 barrels of crude oil a day from Iran in 2011, the second-largest consumer of Iranian oil after China.

"This volume of crude would have to be sourced elsewhere which is likely to tighten supply and push prices upward," Commerzbank said.

The American Petroleum Institute said late Wednesday that crude inventories fell 4.4 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a decrease of 450,000 barrels.

However, inventories of gasoline added 3.4 million barrels last week while distillates rose 5.2 million barrels, the API said.

The Energy Department’s Energy Information Administration reports its weekly supply data later Thursday.

Prices were kept in check by the stronger dollar which makes crude a more expensive and a less attractive investment for traders using other currencies.

On Thursday, the euro was down to $1.2813 from $1.2938 late Wednesday in New York.

In other Nymex trading, heating oil fell 2.08 cents to $3.0691 per gallon and gasoline futures fell 1.57 cents to $2.7695 per gallon. Natural gas futures were down 4 cents to $3.056 per 1,000 cubic feet. –Alex Kennedy in Singapore and Don Melvin in Brussels contributed to this report.

 

Topics: oil prices

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