The new year has got off to a real bang for oil prices as Brent crude oil futures notch up a massive 5 percent gain in trading today as tensions over Iran continue into 2012, but the real question is, will Iran have the strength to take on the US Fifth Fleet?
Latest Brent Oil Price
In London, Brent crude oil futures for February 2012 delivery was trading at $112.27 a barrel, 21.12 GMT today, or 4.6 percent higher on the ICE Futures Exchange.
“It’s mostly about Iran right now. That’s the most bullish factor.” said Peter Beutel, analyst with energy risk management firm Cameron Hanover.
Can Iran Take On The US Fifth Fleet?
Banking giant Merrill Lynch has projected that a shutdown of the Strait of Hormuz could cause a $40 spike in oil prices. However, in order for Iran to choke off the strait, its military would have to take on the US Fifth Fleet, which is based in nearby Bahrain.
“Shutting down the strait won’t happen because the US can’t allow it to happen and Iran knows this,” said Dan Dicker, a former oil trader.
“The Iranians rattle sabers every other Thursday,” said Dicker, though he added that Iran’s posturing could still add fuel to a volatile situation and drive up oil prices.
The Strait of Hormuz is a critical shipping lane, with 17 million barrels of oil per day passing through in 2011, according to the U.S. Energy Information Agency.
That’s about one sixth of global oil production and nearly 20% of all the oil traded worldwide. Iran itself only exports about 2.2 million barrels of oil a day.
Rhetoric from Iran perceived as a threat to oil tankers passing through the Strait of Hormuz has been countered by firm words from the US Navy, which says it would not tolerate any disruption to maritime shipping.
But the verbal clash serves as a reminder of how poorly prepared Arab Gulf exporters are for anything more than a limited blockage, as well as of the possible effects of the Obama administration’s policy of interfering with payments earned by Iran from its own oil exports.
Readers comments are welcome, please add your thoughts below as it gives us all a better idea of how this could play out.
View original here:
Brent oil price jumps 5 percent, question is, will Iran take on the US Fifth Fleet?
Leave a Reply
You must be logged in to post a comment.