Oil rose as the European Union announced a phased-in embargo of Iranian (OPCRIRAN) crude in an effort to contain the Islamic Republic’s nuclear program.
The ban will be implemented in stages by July 1, Dutch Foreign Minister Uri Rosenthal told reporters today in Brussels. The region bought 450,000 barrels a day of Iran’s oil in the first half of 2011, U.S. Energy Department data show. EU finance heads are meeting to craft a long-term plan to tackle the area’s debt crisis.
“It remains to be seen how the embargo will be implemented and therefore how prices will react,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “Sanctions would of course be more effective if the EU can persuade other buyers to join them. And full implementation has been delayed to July 1. A lot can happen in five months.”
Brent oil for March settlement gained as much as $1.33, or 1.2 percent, to $111.19 a barrel and was at $111.80 a barrel at 1:37 p.m. on the ICE Futures Europe exchange in London.
On the New York Mercantile Exchange, West Texas Intermediate crude for March delivery was at $98.85 a barrel after rising as much as 1.2 percent to $99.50. Brent’s premium to WTI widened for a second day, to $11.85.
Phased-In Sanctions
“As of July 1, we have a ban on the import of oil and oil products from Iran,” the Dutch Foreign Minister said, adding that ministers will see how to “limit the damage” to Greece from the measure.
“The solution for Greece could be a gesture from other oil-exporting countries to be accommodative on the price of oil supplied to Greece,” Rosenthal said. “Of course, it could also be the case that within the European Union, among member states, we could have a form of compensation, but those are matters that aren’t at hand now and which have to be solved before July 1.”
Mediterranean countries that import much of their crude from Iran, such as Greece, Spain and Italy, had argued for sanctions to be phased in over as much as a year. The three nations accounted for about 68 percent of EU imports from Iran in 2010, European Commission data show.
Saudi Arabia has unused daily production of about 2.2 million barrels a day that can be deployed to compensate, the International Energy Agency says. The Centre for Global Energy Studies, a consultancy founded by former Saudi Oil Minister Sheikh Ahmad Zaki Yamani, and Washington-based consultant PFC Energy Inc. estimate it may be as high as 2.5 million.
