Oil Falls to Lowest Level in Three Weeks on Plans to Delay Iranian Embargo
Jan. 13 (Bloomberg) -- James Rickards, senior managing director of Tangent Capital Partners, and James Bacchus, chair of global practice at Greenberg Traurig LLP, talk about tensions between the U.S. and Iran and the possibility of a war. Rickards and Bacchus also discuss Europe's sovereign debt crisis and President Barack Obama's request to streamline the executive branch. They speak with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)
Jan. 13 (Bloomberg) -- Edward Morse, head of commodities research at Citigroup Global Markets Inc., and Fadel Gheit, an analyst at Oppenheimer & Co., talk about the outlook for the oil market and gasoline prices. They speak with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Jan. 13 (Bloomberg) -- Ian Bremmer, president of Eurasia Group, talks about the potential impact of Middle East tensions on oil prices. Iranian Vice President Mohammad Reza Rahimi threatened Dec. 27 to block the Strait of Hormuz in response to a proposed European Union embargo on the country’s oil aimed at forcing talks on the Islamic republic’s nuclear program. Bremmer speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)
Jan. 13 (Bloomberg) -- Former Algerian Oil Minister Chakib Khelil discusses the risk to oil supplies if Iran blocks the Strait of Hormuz. He talks with Mark Barton on Bloomberg Television's "On the Move." (Source: Bloomberg)
Jan. 13 (Bloomberg) -- A European Union embargo on imports of Iranian oil will probably be delayed for six months to let countries such as Greece, Italy and Spain find alternative supplies, an EU official with knowledge of the talks said. Lara Setrakian reports from Dubai on Bloomberg Television's "Countdown" with Linzie Janis. (Source: Bloomberg)
Oil dropped to a three-week low after two European Union officials said an embargo on Iranian crude imports may be postponed for six months.
Crude fell 0.4 percent as officials said that the ban would be delayed to allow nations to find new supply. International Atomic Energy Agency inspectors will go to Tehran to discuss Iran’s nuclear program, two diplomats said. Futures also declined after French Finance Minister Francois Baroin said Standard & Poor’s is stripping France of its AAA credit rating.
“We’re still digesting the Iran news,” said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Prices dropped on the news that the EU had pushed back the embargo and may fall further when we get more information about the inspectors’ visit. Anything that reduces tension with Iran sends prices lower.”
Crude oil for February delivery fell 40 cents to $98.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 21. Oil dropped 2.8 percent this week and is up 8 percent from a year earlier.
Brent oil for February settlement declined 82 cents, or 0.7 percent, to end the session at $110.44 a barrel on the London- based ICE Futures Europe exchange. The February contract expires Jan. 16. March futures dropped 70 cents, or 0.6 percent, to $110.35 a barrel.
There will be no floor trading in New York on Jan. 16 because of the Martin Luther King Jr. holiday.
“The weekly move has been relatively weak when you consider all the news,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
Iranian Threat
Iranian Vice President Mohammad Reza Rahimi threatened on Dec. 27 to block the Strait of Hormuz, the transit route for about a fifth of the world’s oil, if the EU bans the country’s oil exports. U.S. Joint Chiefs of Staff Chairman General Martin Dempsey said Jan. 9 that Iran can temporarily choke off the waterway. About 17 million barrels of oil a day passes through the strait, according to the U.S. Energy Department.
“Some of the geopolitical premium has come out of the price during the last two days,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The announcement that the EU sanctions would be delayed has had a major impact on the market.”
Members of the Organization of Petroleum Exporting Countries including Saudi Arabia would be able to make up for a drop in Iranian supplies to Europe, former OPEC President Chakib Khelil said today on Bloomberg Television’s “On the Move.”
Nuclear Program
Rising tension between Iran and the West over the country’s nuclear development has spurred price increases in the past year. The U.S. and its European allies suspect Iran of using the program to create atomic weapons. The government in Tehran says the technology is for domestic power generation.
The Vienna-based IAEA, the United Nations’ nuclear watchdog, agreed to the meeting with Iranian government representatives to be held at the end of January, the diplomats said today on condition of anonymity because the negotiations are continuing.
The euro tumbled, sending commodities lower, after Baroin said France’s rating will be cut to AA+. The euro slipped as much as 1.5 percent to $1.2624, the lowest level since Aug. 25, 2010. A weaker common currency and stronger dollar decrease the appeal of raw materials to investors.
“This is not good news, we would have preferred to keep it,” Baroin said on France 2 Television. “It’s a reduction of one level, it’s the same level as the U.S. It’s not a catastrophe.”
Credit Ratings
Italy’s credit rating was cut two levels, to BBB+ from A, by S&P, said an EU official who declined to be identified because the decision is not yet public.
Germany, Europe’s biggest economy, will retain its AAA rating in the review of euro-area countries’ credit grades, a European government official said.
The Institute of International Finance, the group representing Greece’s bank creditors, said talks with the government have “paused for reflection” after the discussions failed to produce a “constructive consolidated response by all parties.” The sovereign debt crisis began in Greece and then moved to Ireland, Portugal, Italy and Spain.
“Expectations that the French downgrade is finally coming are a reminder that the European debt crisis is far from resolution,” Kilduff said.
Oil gained as much as 1.1 percent earlier after Nigerian labor unions said they will continue a strike that threatens oil exports from Africa’s top producing country. The main oil workers’ union, Pengassan, said it will meet tomorrow to decide whether to proceed with plans to start shutting fields Jan. 15.
Oil volume in electronic trading on the Nymex was 658,039 contracts as of 5:04 p.m. in New York. Volume totaled 774,439 yesterday, the highest since Dec. 13 and 29 percent above the three-month average. Open interest was 1.38 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
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