European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, adding pressure on crude prices to rise and on the Persian Gulf nation to halt its nuclear- enrichment program.<\/p>\n
The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields.<\/p>\n
\u201cWe expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,\u201d Gordon Kwan, the head of regional energy research at Mirae Asset Securities based in Hong Kong, said in a June 28 report. \u201cThe imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.\u201d<\/p>\n
Brent futures fell below $90 a barrel on June 21 for the first time in 18 months on concern that Europe\u2019s debt crisis may spread and sap fuel use. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A\/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange, the biggest one-day increase since April 2, 2009, when prices jumped 9 percent. Brent slid to $95.77 today.<\/p>\n
Unsold Barrels<\/strong><\/p>\n Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report.<\/p>\n Mohammad Ali Khatibi, Iran\u2019s governor to OPEC, warned yesterday that the EU would bear \u201cthe consequences of politicizing the market,\u201d without specifying what he meant, the state-run Iranian Students News Agency reported.<\/p>\n Mahmoud Bahmani, Iran\u2019s central bank governor, said his nation \u201cisn\u2019t sitting by idly\u201d and has a \u201cvery suitable\u201d $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. \u201cWe have programs to fight the sanctions, and we will confront hostile policies,\u201d Bahmani said yesterday, according to the state-run Mehr news agency.<\/p>\n Intensified Pressure<\/strong><\/p>\n Secretary of State Hillary Clinton said Iran will face increasing pressure from sanctions aimed at its nuclear program. Complementing the European restrictions is a U.S. law enacted Dec. 31 that cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan, until June 28 to demonstrate they had \u201csignificantly reduced\u201d their purchases of Iranian oil in order to qualify for exemptions.<\/p>\n \u201cThe pressure track is our primary focus now, and we believe that the economic sanctions are bringing Iran to the table,\u201d Clinton said in an interview with Bloomberg Radio in Geneva on June 30. \u201cThey are going to continue to increase and cause economic difficulties\u201d for the country, she said.<\/p>\n Iran\u2019s economy has deteriorated amid the punitive measures, which have weakened the national currency and pushed up costs that were already surging after the government started removing energy and food subsidies a year and a half ago. Inflation accelerated to 22.2 percent in the 12 months ended May 20, the Central Bank said.<\/p>\n Shrinking Economy<\/strong><\/p>\n The World Bank forecast in a June 12 report that Iran\u2019s $480 billion economy will shrink by 1 percent this year and 0.7 percent in 2013.<\/p>\n The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out yesterday.<\/p>\n Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn\u2019t be extended after talks between Iran and the world\u2019s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons.<\/p>\n \u2018Toughest Measures\u2019<\/strong><\/p>\n \u201cThese are the toughest measures the EU has adopted against Iran to date,\u201d U.K. Foreign Secretary William Hague said yesterday in a statement. \u201cIt is in the power of the Iranian leadership to end Iran\u2019s current isolation, but unless they change course, the pressure will only increase.\u201d<\/p>\n The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world\u2019s tankers because they\u2019re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule.<\/p>\n In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential.<\/p>\n Oil and its derivatives account for nearly 80 percent of Iran\u2019s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country\u2019s 2010 net oil export revenues at $73 billion.<\/p>\n Iran\u2019s oil exports may \u201cgradually\u201d decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26.<\/p>\n Hormuz Missiles<\/strong><\/p>\n Such acknowledgment hasn\u2019t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint.<\/p>\n \u201cThe Strait of Hormuz and the Persian Gulf is Iran\u2019s playground and no one else\u2019s,\u201d Mehr cited Admiral Ali Fadavi as saying. \u201cAny issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.\u201d<\/p>\n A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline.<\/p>\n \u201cThat is the wildcard, the Iranian situation,\u201d Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA (DNB), said by phone on June 29.<\/p>\n \u2018Huge\u2019 Inventories<\/strong><\/p>\n \u201cNobody can be totally certain how it\u2019s really going to affect the market,\u201d he said. \u201cThere\u2019s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.\u201d<\/p>\n Iran urged OPEC to call an emergency meeting to address the group\u2019s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members \u201cwill negatively impact oil prices in the international market,\u201d Qasemi said.<\/p>\n The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg.<\/p>\n","protected":false},"excerpt":{"rendered":" European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-274","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"\n