Iranian Tensions Pressure Oil Prices
Growing tensions over Iran's nuclear program are escalating fears of global oil supply disruptions, putting upward pressure on the price of crude and heating oil. (image: moneytrendsresearch.com)
Fears are growing of global oil supply disruptions after Europe announced a ban on Iranian oil in response to the rogue nation’s nuclear program.
UN arms inspectors are carrying out inspections in Iran this week and the country’s leaders were scheduled to debate the ban yesterday in response to an EU embargo on Iranian crude, AP Business reports.
The embargo was signed off last week and is set to take effect by summer, prohibiting the purchase of Iranian oil by European Union countries. It aims to curb the Middle Eastern nation’s oil revenue as concerns grow among the international community that Iran is building a nuclear bomb.
Oil prices hovered around $100 a barrel today after the EU announcement. Iran has indicated it could blockade the Strait of Hormuz in the Persian Gulf if new sanctions were implemented targeting its lucrative oil exports.
The head of Iran’s national oil company warned Sunday that EU sanctions could push oil prices up to between $120 and $150 a barrel, washingtonpost.com reported.
About one-fifth of the world’s supply of oil is shipped through the strategic waterway. The US and other nations have said they will not tolerate an Iranian blockade. US, British and French warships regularly patrol the Gulf and naval activity in the region is stepping up as tensions rise.
Investors are growing increasingly worried that any Iranian oil ban could disrupt world oil supplies and push prices even higher. The threat to oil shipments over the blockade standoff is only increasing tensions and putting more pressure on oil markets.
The developments have direct implications for heating oil customers as the price of fuel oil is closely linked to that of crude. With winter heating demand kicking in and prices already high, the last thing homeowners need is another oil price spike.
EU countries account for about 18 percent of Iran’s oil exports. Analysts believe any shortfall in Europe could be made up by other countries. If Iran was forced to stop selling oil to Europe, it should find other takers in Asia. China is Iran’s biggest oil customer as it seeks to fuel its rapidly expanding industrial base and burgeoning construction sector.
Craig says: says:
I don’t believe that the Northeast can take any more increasing in the price of oil. They are struggling enough as it is.