US WTI crude oil futures kick off the new years trading session back near $101 a barrel as oil prices bounced on increased concerns over Iran that could lead to crude oil supply disruptions in the Strait of Hormuz.
Latest WTI Oil Price
US Light crude oil futures for February 2012 delivery was trading at $100.76 a barrel, 07.22 GMT this morning in electronic trading on the NYMEX.
Global oil markets were closed on Monday, local time, for the New Year’s Day holiday.
Concerns Over Iran Boost Oil Prices
Iran on Monday said it had tested two long range missiles near the Strait of Hormuz, amid growing tensions with the West over the country’s nuclear program.
The latest military maneuvers came after reports over the weekend that Iranian scientists had developed their first nuclear fuel rod despite United Nations sanctions and measures by the US to stop the country’s atomic work. On Saturday, US President Barack Obama signed new sanctions against Iran into law, targeting the country’s central bank, oil exports and financial sector.
In response, Iran has warned it could shut the strategic Strait of Hormuz, a narrow Gulf shipping lane through which 40 percent of the world’s oil passes.
The US and its European allies accuse Iran of using its nuclear program as a cover to develop atomic weapons. Iran denies the charge, saying the program is for peaceful purposes and is geared towards generating electricity.
Oil prices are essentially driven by geopolitical risk premiums and it is precisely because the actions of nations cannot be predicted that so many are expecting 2012 to usher in far higher oil prices.
Just last week oil prices looked poised to react to escalating tensions between the US and Iran. Iran, the world’s fifth largest oil producer, threatened to choke off oil flows through the Strait of Hormuz as it looks for ways to punish the west for its proposed sanctions on the country.
Meanwhile, French foreign minister Alain Juppe said on Tuesday that Iran was continuing to develop nuclear weapons and called for stronger sanctions against Tehran.
“Iran is pursuing the development of its nuclear arms, I have no doubt about it,” he told French television I-Tele.
“The last report by the International Atomic Energy Agency is quite explicit on this point. This is why France, without closing the path of negotiation and dialogue with Iran, wants stricter sanctions.” Juppe added.
Iran is facing sanctions from the US and Europe, which are targeting the halting of Iran’s controversial nuclear activities.
Iran’s Rial Slides Against US Dollar
Iran’s currency dropped 12 percent against the US dollar in market trading today after the US unveiled fresh sanctions targeting its central bank. According to reports, the Iranian rial was being traded at 17,800 to the US dollar by money changers in Tehran on Monday, down from 15,900 on Sunday.
The Iranian central bank’s website showed the exchange rate as 11,180 rial to one US dollar.
“The sanctions will force a choice between buying Iranian oil or engaging in the US financial system, the largest in the world. That is going to change the risk calculus for a lot of folks.” said Brian Katulis of the Center for American Progress.
This has led to speculation that some firms may now try to withdraw capital from Iran. According to media reports, money changers in Tehran had stopped selling the US dollar in the hope that they will get an even better rate in coming days.
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US WTI crude oil trading near $101 a barrel on increased concerns over Iran
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