Author: SondraHunter

The price of WTI oil futures has fallen back to around $101 a barrel in trading on Wednesday afternoon as US government data showed American crude oil stocks rose significantly last week as traders continued to eye developments surrounding tensions between Iran and the West.

Latest WTI Oil Price

US Light crude oil futures for February 2012 delivery was trading at $101.09 a barrel, 20.45 GMT today on the NYMEX, or down 1.4 percent on the day.

US Weekly Oil Stocks

The US EIA said in its weekly oil stocks report that US Light crude oil inventories rose by 5 million barrels in the week ended January 6, significantly higher than expectations for a 1 million barrel increase.

Total US crude oil inventories stood at 334 million barrels as of last week, above the upper limit of the average range for this time of year.

Oil prices were also affected by a broadly stronger US dollar, which re-approached a 16 month high against the euro, while the ICE US Dollar Index, which tracks the US dollar against six major world currencies, was up 0.7 percent to trading at 81.72.

Meanwhile, oil traders continued to monitor tensions between Iran and the West after Iran’s Fars news agency reported that an Iranian nuclear scientist was killed in a bomb explosion in northern Tehran earlier in the day.

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WTI oil trading at $101 as weekly US oil stocks data comes in positive

The price of gold futures remains firm in trading today as strong physical buying from China boosts the outlook for the precious metal to add on further ground as big gains were curbed by a weaker euro, profit taking and gloomy world stock markets.

Latest Gold Price

Gold for February delivery added $8.10 at $1,639.60 an ounce at the Comex division of the NYMEX. The gold price has traded as high as $1,648 and as low as $1,630.80 an ounce while the gold spot price was up $6, according to Kitco’s gold index.

“Some people will sell into strength as gold moved above the 200 day moving average,” a key technical level, says Will Rhind, head of US operations for ETF Securities.

Rhind thinks that some more negative news out of Europe will help gold as investors buy it as a safe haven. “What we’re seeing right now is that emergence of that store of value, that safe haven trade.”

China Buys Gold

Evidence of strong buying from China was propping up gold prices today. China imported a record 103 tons of gold from Hong Kong in November, up 19 percent month on month and a 483 percent increase year on year, according to Goldcore, a bullion dealer.

“As Chinese people’s disposable incomes gain and concerns grow over inflation and equity and property markets, Chinese consumers and investors are turning to gold as a long term investment hedge,” says Goldcore in a recent note.

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Price of gold remains firm as strong physical buying from China boosts outlook

Financial markets struggled as sovereign debt problems in the Eurozone returned to the centre stage. European bourses slid although Germany and France suggested that the fiscal compact may be completed by the end of January. Wall Street edged higher but the outlook was not too bullish. In the commodity sector, the front-month contract for WTI crude oil initially to slipped to 4-day low of 100.1 before recovering to 101.31 at close while the equivalent Brent crude contract settled at 112.45 after plunging to as low as 111.8. Both contracts recorded losses during the day.

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Concerns about Eurozone Crisis Return

An Iranian newspaper today quotes a senior commander in Iran’s Revolutionary Guard as saying that Tehran’s leadership has decided to order the closure of the strategic Strait of Hormuz if the country’s oil exports are blocked (possibly referring to recent sanctions against the country).

Khorasan daily reported Sunday that Ali Ashraf Nouri says the strategic decision has been made by Iran’s top authorities.

Practising Strait of Hormuz Closure

Iran’s next round of Persian Gulf naval drills will practice the armed forces ability to close the Strait of Hormuz, a lawmaker on parliament’s national security committee was cited by Mehr News as saying.

Iran’s elite Revolutionary Guards Corp will start naval exercises on 27th January in the Gulf with the aim of enhancing the country’s ability to close the chokepoint into that body of water “in the shortest possible time when the situation requires it.” Mehr cited Esmaeil Kowsari, a member of parliament’s National Security and Foreign Policy Committee, as saying in a report published on Saturday.

Iran threatened last month to shut the Strait, a transit point for a fifth of oil traded worldwide, if sanctions are imposed on its crude oil exports.

Effect of Sanctions

The Obama administration will implement the new US sanctions gradually over the next six months, however, the American measures, combined with a pending EU ban on importing Iranian crude, will wreak havoc on Tehran’s energy exports, which generate the overwhelming majority of the regime’s foreign exchange.

Beyond Europe, major Iranian customers such as Japan and South Korea will co-ordinate carefully with Washington. China is already cutting back its purchases in a bid for considerable price discounts.

For the oil markets, the net effect of the latest sanctions against Iran and the tensions will bring intensified volatility and sustained higher crude oil prices.

UK Destroyer on Route

Meanwhile, the United Kingdom on Saturday revealed that it is planning to send warships to the Persian Gulf.

The UK Ministry of Defense described the deployment of the HMS Daring as “long-planned” and “entirely routine.” The destroyer will replace a frigate stationed in the area, it said.

India to Pay Iran for Crude Oil in Rupees

India has announced today new plans to pay for Iranian crude oil it imports in Indian rupees, opposed to US dollars.

A senior Indian government official, speaking on condition of anonymity, said the issue will be addressed when a multi disciplinary team visits Tehran on January 16 to discuss uninterrupted supply from the major oil producer, the Press Trust of India reported on Sunday.

Under the proposal, the National Iranian Oil Company (NIOC) will open an Indian rupee account with Indian banks, and can use the money to purchase non strategic commodities like railway imports. However, the NIOC cannot use the money to invest in India or buy shares in Indian companies.

India satisfies about three quarters of its crude oil demands through imports and Iran is its second largest supplier after Saudi Arabia.

World Chaos Within 24 Hours

Rear Adm. Ali Fadavi, of Iran’s Islamic Revolutionary Guard Corps, said last month the world could not last 24 hours without Persian Gulf oil, and that Iran is capable of closing the strait.

“Today, out of the 1,300 billion barrels of oil in the world, 800 billion barrels are in the Persian Gulf,” Fadavi commented.

The US Navy said the threat to block the strait is unacceptable, as the flow of goods and services is vital not only to the region but to the world.

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Iran plays with fire as report suggests Strait of Hormuz could well see closure

The price of WTI crude oil fell in trading today as the weekly US oil stocks data out from the EIA showed a surprise gain after the American government reported an unexpected increase in crude supplies and a 7 percent drop in petroleum demand.

Latest WTI Oil Price

US Light crude oil futures for February 2012 delivery was trading at $101.03 a barrel, 15.00 GMT today on the NYMEX.

In midday trading benchmark US Light crude fell 41 cents to $102.81 per barrel in New York.

US Oil Stocks – Weekly Data

The EIA said that oil stocks grew by 2.2 million barrels last week. Analysts expected them to shrink by 450,000 barrels, according to a survey by Platts.

Meanwhile, investors are keeping close watch on the Persian Gulf. Iran has ratcheted up tensions there by threatening to close the Strait of Hormuz, the world’s most important oil transit chokepoint with a third of waterborne oil trade passing through the two mile wide strait each day.

The US has made clear it does not plan to allow Iran to close the transit route.

In a research report Friday, JP Morgan said that other Middle East exporters likely have enought spare oil production capacity to replace Iran’s crude exports should a European Union embargo on Iranian oil move forward.

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WTI crude oil price falls as US oil stocks data shows a surprise gain

The price of gold is holding out around $1600 an ounce on Thursday whilst the US dollar makes gains against most major currencies including the euro, as seen by the ICE US Dollar Index, which passed through 81 in trading this afternoon.

Latest Gold Price

Gold for February delivery was adding losing $2s at $1,610.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,626.80 and as low as $1,605.60 an ounce while the spot price was down $3, according to Kitco’s gold index.

Gold Buying Safe Haven?

Higher gold prices seem to still be held lower by a stronger US dollar, weaker euro and volatile stock market. Gold’s connection to the “risk on trade,” meaning that the metal has been rallying alongside stocks and the euro, can mean that gold is not being traded as a safe haven.

However, gold prices have also seen an upside as concern over Iran’s nuclear program fueled oil and gold price rises this week. Tensions between Iran and western countries escalated after the EU reached a preliminary agreement to ban imports of oil from Iran, prompting investors buy back into gold, which is seen by many as a safe haven asset.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currncies was trading at 81.135 14.20 GMT today, from the session open of 80.425.

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Gold price holds out around $1600 as US dollar shows more strength against major currencies

European governments have agreed in principle to ban imports of Iranian oil, EU diplomats said this afternoon, dealing a potentially heavy blow to Iran imposing real pain just months before an Iranian election, whilst Brent oil prices rose to $114 before easing back.

The prospective embargo from the EU, along with tough US financial measures signed into law by President Barack Obama on New Year’s Eve, form a concerted Western campaign to impose sanctions over Iran’s nuclear programme.

Greece Agrees to Sanctions

Diplomats said EU envoys had held talks on Iran in the last days of December, and that any objections to an oil embargo had been dropped, notably from crisis hit Greece which gets a third of its oil from Iran, relying on Tehran’s lenient financing. Spain and Italy are also big buyers.

“A lot of progress has been made,” one EU diplomat said, speaking on condition of anonymity. “The principle of an oil embargo is agreed. It is not being debated any more.”

The embargo will force Tehran to find other buyers for oil. EU countries buy about 450,000 barrels per day (bpd) of Iran’s 2.6 billion bpd in exports, making the bloc collectively the second largest market for Iranian crude after China.

The news caused a spike rise in oil prices, with Brent crude peaking at nearly $114 a barrel in intraday trading, up nearly $2 from Tuesday’s close.

Tehran insisted it would have no trouble: “We could very easily replace these customers,” said S. M. Qamsari, International Director of the National Iranian Oil Co.

But the new US sanctions have already made it difficult for Iran to keep the customers it has, and could force it to offer steep discounts to countries willing to risk doing business with it, hurting its revenues. Biggest trading partner China, driving a hard bargain, has cut its order of Iranian oil by more than half this month.

Unilateral Sanctions

“The principle of an oil embargo is agreed. It is not being debated anymore,” one EU diplomat said on condition of anonymity on Wednesday. Although the sanction has been agreed on in principle, the EU governments have not yet decided on a date to put the embargo in place.

The anti Iran move by the EU came after the United States, Britain, and Canada imposed unilateral sanctions on the Islamic Republic’s energy and financial sectors over Tehran’s nuclear program.

Alternative Supply Route

Iran has alternatives in place to let it cope with a threatened European Union embargo on its oil and increased US pressure, and plans to keep up exports of some 2.3 million barrels per day this year, a senior Iranian oil official said.

Tehran had already considered different routes if that were to happen, S.M Qamsari, International Director of the National Iranian Oil Co said from Tehran shortly before the report on the EU stance emerged.

“We could very easily replace those customers,” said Qamsari. Some, but not all, of any displaced volume could move into China as well as other Asian countries and Africa, he said. Iran was unlikely just to store crude on tankers as that was only a short term solution.

He said he expected shipments would remain unchanged this year and the volume of term, or annual, contracts was unchanged.

“We’ve got very high demand from our lifters, so we have the same quantity in our term contracts,” Qamsari said.

Roughly 30 percent, or just under 700,000 bpd, of Iran’s oil steams west of Suez, he said. More than half that volume is shipped to Europe, roughly 200,000 bpd goes to Turkey and the remainder is routed into Africa.

The International Energy Agency estimates Iran exports about 450,000 bpd to the EU.

The NIOC official said Europe’s longstanding buyers of Iranian crude, among them France’s Total and Italy’s Eni have voiced concern about potential EU sanctions, but had yet to cut back on contractual supplies.

Any punitive moves by Brussels could cause European consumers to suffer through higher prices at the pump, he said.

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European governments agree to ban imports of oil from Iran, Brent price rises