Oil dropped the most in two weeks after a proposed European Union embargo of Iranian oil imports was said likely to be delayed for six months.
Crude fell 1.8 percent on the postponement that will allow countries such as Greece, Italy and Spain to find alternative supplies, according to an EU official with knowledge of the talks. Futures surged above $103 a barrel this month to the highest level since May as Iran threatened to block the Strait of Hormuz if an embargo was imposed.
“The EU-Iran news is sending prices lower,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. “Once the Iran headlines came out, the dam burst.”
Crude for February delivery tumbled $1.77 to settle at $99.10 a barrel on the New York Mercantile Exchange. It earlier touched $98.93 a barrel. Prices have risen 7.9 percent in the past year.
Futures decreased in the last 20 minutes of floor trading, erasing an earlier gain of as much as 2.1 percent.
Brent oil fell $1.17, or 1 percent, to $111.07 a barrel at 2:42 p.m. New York time on the London-based ICE Futures Europe exchange. It traded as high as $115.12, the most since Nov. 9, before dropping to $110.97 on the EU-Iran news.
The embargo, which would need to be agreed to by the 27 nation-bloc’s foreign ministers on Jan. 23, is also likely to include an exemption for Italy, so crude can be sold to pay off debts to Rome-based Eni SpA, Italy’s largest oil company, according to the official, who declined to be identified because the talks are private.
Proposed Ban
A ban on petrochemical products would start sooner, about three months after ministers agree to the measure, the official said.
“The European Union could not take a stand and implement an oil embargo of Iran because a number of the states rely on Iranian crude oil,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. A supply disruption “could still have hurt these very fragile economies that are teetering on the brink of recession.”
Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, pumped 3.58 million barrels of crude a day last month, according to Bloomberg estimates.
