Oil fluctuated below $100 a barrel in New York as speculation U.S. stockpiles gained last week countered concern Iran will respond to a European embargo on its crude exports by shutting the Strait of Hormuz.
Futures were little changed after rising 1.3 percent yesterday. EU foreign ministers agreed to ban Iranian supplies starting July 1 to pressure the country over its nuclear program. The Persian Gulf nation has threatened to close the Strait of Hormuz in response. An Energy Department report tomorrow may show U.S. crude stockpiles rose 1.5 million barrels last week, according to a Bloomberg News survey.
“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 $115 but it hasn’t happened.”
Crude for March delivery was at $99.77 a barrel, up 19 cents, in electronic trading on the New York Mercantile Exchange at 3:59 p.m. Sydney time. The contract earlier increased as much as 0.4 percent to $99.98. It yesterday advanced $1.25 to $99.58, the highest since Jan. 19. Front-month prices are 13 percent higher the past year.
Brent oil for March settlement was at $110.82 a barrel, up 24 cents, on the London-based ICE Futures Europe exchange. The future rose 0.7 percent to $110.58 yesterday. The European benchmark contract’s premium to West Texas Intermediate was at $11.06 today, compared with a record $27.88 on Oct. 14.
Freeze Assets
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 a fifth of the world’s crude, according to the U.S. Department of Energy. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Qatar and Kuwait ship crude 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.
While the Organization of Petroleum Exporting Countries refuses to get involved in a political dispute, Saudi Arabia, controlling spare output equal to five times the amount at risk, has pledged to ensure adequate supply and Libya is pumping more crude than at any time since the toppling of Muammar Qaddafi.
Saudi Capacity
Europe imported 450,000 barrels a day of the nation’s crude in the first half of last year, U.S. Energy Department data shows. Saudi Arabia (OPCRSAUD) can boost production to 12.5 million barrels a day from current rates of about 9.8 million, Oil Minister Ali al-Naimi said in an interview with CNN broadcast on Jan. 16. That would leave the desert kingdom with about 2.7 million barrels a day to spare.
