Oil steady as dollar gains cap rise on Iran tension

by lexie Thu Jan 05, 2012 8:46 am

Thu Jan 5, 2012 7:45am EST

Oil steady as dollar gains cap rise on Iran tension

(Reuters) - Oil was steady at around $113.80 a barrel on Thursday as geopolitical tensions kept a floor under prices, following a European Union agreement to stop importing Iranian crude, but a stronger dollar capped gains.

Brent crude futures were up 4 cents to $113.74 at 1212 GMT, giving up earlier gains as the dollar strengthened. U.S. crude, which is less influenced than Brent by international developments and more by domestic oil inventories, was down 71 cents at $102.51 a barrel, having earlier slipped more than $1 to an intraday low of $102.16.

Analysts and traders said oil prices had come under pressure as the dollar rallied, up 0.65 percent against a basket of currencies .DXY at 1214 GMT.

But they added there was potential for crude to rise given the tensions surrounding Iran and Syria, and calls for strikes in Africa's biggest producer Nigeria, which may affect crude oil exports.

On Wednesday, European Union governments reached a preliminary agreement to ban imports of Iranian crude to the EU, although they have yet to decide when the embargo will be put in place.

U.S. Treasury Secretary Timothy Geithner will travel to China and Japan next week to discuss U.S. sanctions on Iran with top government officials.

"It is the geopolitical situation that is supporting the prices, with the possible EU import ban on Iranian oil," said Eugen Weinberg, an analyst at Commerzbank in Frankfurt. "Oil prices are also establishing themselves above $100 in the case of WTI (U.S. crude) and above $110 in the case of Brent."

Analysts also pointed to potential problems in Nigeria following the government's decision to remove gasoline subsidies at the start of 2012 which has triggered protests and calls for strikes by trade unions.

"Nigeria has a history of long strikes and that can have an impact on overall crude exports - that is definitely something that needs to be watched," said Olivier Jakob, oil analyst at Petromatrix.

He warned that the price of gasoline in Europe per tonne was already above the peak levels seen in the Libyan crisis.

"The West is playing a very dangerous game with Iran - they are making a lot of assumptions, but if you have something blowing up in Nigeria, the prices could really start to get out of control. It is a difficult time to be short oil I think," he said.

Brent has gained nearly 6 percent over the last two sessions and closed at the highest since November 11 on Wednesday. U.S. crude gained 4.4 percent over the same period and settled at its highest since May 10 on Wednesday.

Despite the EU embargo threat, Iran says it is ready to ship its oil to China and other Asian countries as well as Africa.

"The excess Iranian production will continue to be fed back into Asia," said Jonathan Barratt, chief executive of Barrattsbulletin.com. Buyers could strike a deal to buy the crude at lower prices, he added.

Saudi Arabia had said it is prepared to increase output in case of a sudden supply cut [ID:nL6E8C51UZ]. But Commerzbank analysts said it is already producing 10 million barrels per day and spare capacity would be virtually used up.

"Given these developments, the risk premium on the oil price can be expected to rise further," they said in a note. "When spare capacities were last more-or-less exhausted in mid-2008, the oil price climbed to nearly $150 a barrel."

OPEC oil output rose in December to the highest since October 2008, a Reuters survey found, as members showed little sign of cutting output as Libyan supplies recover.

http://www.reuters.com/article/2012/01/05/us-markets-oil-idUSTRE7AD06820120105

by lexie Thu Jan 05, 2012 9:22 am

Washington lauds EU intent to ban Iran oil
Jan. 5, 2012 at 3:30 AM

WASHINGTON, Jan. 5 (UPI) -- The Obama administration welcomed Europe's agreement in principle to ban Iranian oil imports, increasing pressure on Iran to end its nuclear ambitions.

The decision is "very good news," State Department spokeswoman Victoria Nuland said, after European Union diplomats reported consensus was reached on an embargo and a formal agreement would likely be finalized at an EU foreign ministers meeting Jan. 30.

The EU is considering following a U.S. move announced Saturday to impose further economic sanctions on Iran to punish it for its nuclear-research program, The Wall Street Journal reported.

The U.S. move penalizes foreign companies that do business with Iran's central bank, which collects payments for most of Iran's energy exports.

"These are the kinds of steps that we would like to see not just from our close allies and partners in places like Europe but from countries around the world, because we do believe that this is consistent with tightening the noose on Iran economically," Nuland said. "We think that the place to get Iran's attention is with regard to its oil sector."

Oil represents about 60 percent of Iran's economy, and oil exports are a vital source of foreign currency.

European countries bought about 18 percent of Iranian oil in 2010, about 450,000 barrels a day, with most of the rest of Iran's 2.6 million daily barrels going to Asia.

Iranian oil accounted for about 6 percent of Europe's total crude imports in 2010, with Spain, Greece and Italy the most reliant on shipments from Iran.

Under the tentative EU deal, Madrid and Athens would have a grace period to break oil contracts with Tehran and seek alternative oil supplies, European diplomats told the Journal.

Italian Prime Minister Mario Monti said this week Italy would support an oil embargo if deliveries to repay $1.3 billion in Iranian debts to the Italian oil and gas company Eni SpA were exempted. The Italian government and state treasury own 50 percent of Eni.

EU officials did not reach consensus on the timing and duration of the sanctions, diplomats said.

One diplomat told the British newspaper The Guardian the sanctions could go into effect at the same time as the U.S. sanctions President Barack Obama signed Saturday.

Iranian defense officials this week responded to the sanctions efforts by test-firing new missiles, threatening to shut the Strait of Hormuz to shipping, holding naval war games, announcing the production of its first nuclear-fuel rod and warning a U.S. aircraft carrier not to return to the Persian Gulf.

Iran's Parliament considered a bill Wednesday requiring all foreign warships to gain Tehran's permission to enter the strategic shipping choke point.

Ships traversing the narrow strait, through which 40 percent of world oil flows, pass through territorial waters of Iran and Oman under the transit passage provisions of the U.N. Convention on the Law of the Sea.

Citing Iranian analysts said the bill would probably not have been introduced if it were not supported by higher authorities, The Washington Post reported.

U.S. and European officials said they were not concerned about Tehran's threats.

"We believe that the United States needs to continue to play the global role that we have played for a long time in terms of ensuring and promoting freedom of navigation in international waters, and our policy will continue to reflect that," Nuland said Wednesday.

"We consider [the strait] international territory," she said.

U.S. and European officials, supported by the International Atomic Energy Agency, allege Tehran intends to use its nuclear-research program to build nuclear weapons.

Iranian officials insist their nuclear goal is to generate electricity without dipping into the oil supply they prefer to sell abroad, and to provide fuel for medical reactors.

Read more: http://www.upi.com/Top_News/US/2012/01/05/Washington-lauds-EU-intent-to-ban-Iran-oil/UPI-14381325752200/#ixzz1iarbhbNJ

Oil steady as dollar gains cap rise on Iran tension

Oil steady as dollar gains cap rise on Iran tension

Re: Oil steady as dollar gains cap rise on Iran tension