Crude oil futures climbed above $101 a barrel Thursday after Iran threatened an immediately halt crude oil sales to the European Union and U.S. indicators showed an improving economy.
Iran said Thursday it was considering an immediate halt to oil exports to the European Union, in response to the EU embargo set to be fully in place by July 1. The EU nations import about 600,000 barrels a day of Iranian oil and Monday set the embargo to ratchet up pressure on Tehran to halt its controversial nuclear program. But Iranian lawmakers want an abrupt halt of the exports–accounting for 5.8% of EU needs in 2010–in order to push prices higher and hurt European economies.
Traders said that, at least in the short-term, the move could generate more revenue for Iran if the bulk of its customers in Asia are forced to pay higher prices for crude supplies. But the impact could be brief if Saudi Arabia, the world’s biggest oil exporter, uses spare capacity to cover supplies, or if consumer nations release emergency stockpiles to fill a supply gap. The Iran news come as oil gained support also from a weaker dollar and strong U.S. economic indicators. U.S. jobless claims rose by 21,000 last week, slightly below the expected increase of 23,000, data from the Labor Department show. December orders for durable goods rose for a third straight month, according to the Commerce Department. The 3% rise topped economists’ forecasts for a 2% gain.
The dollar was weaker in response to the Federal Reserve’s plan to keep U.S. interest rates at near zero to 2014. Buyers using foreign currency often flock to relatively cheaper oil at times of dollar weakness. Light, sweet crude oil for March delivery on the New York Mercantile Exchange was 1.7%, or $1.70 a barrel higher, at $101.10 a barrel, after hitting a one-week high of $101.39 a barrel. ICE North Sea Brent crude was $1.82 higher at $111.63 a barrel.
In remarks carried by Iran’s parliament website Icana, Mohammad Karim Abedi, a member of the National Security and Foreign Policy Committee, said that at “the first open session of parliament [Sunday], we will pursue sanctions against Europe.” Another Iran lawmaker called for an emergency meeting of the Organization of Petroleum Exporting Countries to block Saudi Arabia’s pledge to boost production and fill any supply gap for its customers.
Ali Naimi, Saudi oil minister, said recently that the kingdom’s oil output quickly could be increased to around 11.8 million barrels a day, while it would take about 90 days to bring production to capacity of 12.5 million barrels a day. Official data show Saudi output was slightly above 10 million barrels a day in November and the International Energy Agency, the oil policy watchdog for the major industrialized nations, estimated December output at 9.85 million barrels a day. After the EU embargo was agreed, the IEA said the July 1 date would allow sufficient time to line up crude supplies from elsewhere. The IEA, which coordinated emergency oil reserves held by members of the Organization for Economic Cooperation and Development, said Thursday it was closely monitoring the situation regarding Iran, but wouldn’t comment further.
At the same time, Iran’s President Mahmoud Ahmadinejad said Thursday his nation is ready to sit down with world powers for talks on its nuclear program, the state television website reports.
EasyForexNews Research Team