World
Institutional
links
Welcome back on
26 -29 August,
ONS 2008
Bridging
the energy gap
is ONS 2006 theme,
from 22-25 August,
in Stavanger, Norway
Petroleumworld
Business
Partners:
Centre for
Global Energy
Studies
  |
Oil prices fall despite Strait of Hormuz incident
NEW YORK
Petroleumworld.com, Jan 08, 2008Oil prices fell sharply Monday, slipping further away from the 100-dollar mark, despite the Pentagon reporting a close weekend encounter between the US Navy and Iranian vessels in the strategic Strait of Hormuz.
Traders said prices also declined as some speculators engaged in a bout of profit-taking amid lingering fears that slower US economic growth could dent global energy demand.
Prices had briefly pushed higher after the Pentagon said three US warships had been briefly harassed on Sunday by five Iranian speedboats in the Strait of Hormuz, a crucial gateway for global energy supplies.
"The United States Navy took appropriate measures in a situation like this and was prepared to escalate if necessary," said Pentagon spokesman Bryan Whitman.
Iran's government played down the incident.
New York's main oil futures contract, light sweet crude for delivery in February, closed down a hefty 2.82 dollars at 95.09 dollars per barrel. The contract struck a record high of 100.09 dollars in intraday trade last Thursday.
In London, Brent North Sea crude for February settled 2.40 dollars lower at 94.39 dollars. Last week it touched an historic peak of 98.50 dollars.
The Strait of Hormuz is a vital outlet for world energy supplies because crude exports from oil-rich Gulf Arab countries pass through the strait -- or about 20-25 percent of the world's crude.
"We did see a brief bounce when the Iranian news came out," said Sucden trader Rob Montefusco.
"They were looking to bash through 100 dollars again but there wasn't any follow-through buying," he said.
The incident came ahead of US President George W. Bush's departure Tuesday for the oil-rich Middle East region, intended to boost the Israeli-Palestinian peace process while reiterating to allies that Washington continues to view oil producer Iran as a threat.
"We've seen a bit of profit-taking coming in -- there are a few economic worries in the market at the moment so prices are down for now," Montefusco said.
The US Labor Department reported on Friday that the economy gained just 18,000 nonfarm jobs in December, marking the slowest pace of job creation since 2003.
The unemployment rate rose to 5.0 percent, the highest in more than two years.
"The economic outlook and impact that may have on oil demand continues to weigh on the market so some market participants saw that as a chance to take their profits," said Societe Generale analyst Mike Wittner.
Traders predict cautious trade ahead of the next meeting of the Organisation of the Petroleum Exporting Countries on February 1.
Outgoing OPEC president, the United Arab Emirates, said the recent rise in prices to 100 dollars had nothing to do with market fundamentals, the WAM state news agency reported.
The gain rather was because of "speculation, investment funds (purchases), regional tensions and other factors unrelated to supply and demand," it quoted UAE Energy Minister Mohammad bin Dhaen al-Hamli as saying.
OPEC "is closely monitoring developments on the oil market," he said, without indicating what decision might be taken at the cartel's meeting at its Vienna headquarters next month.
Analysts have noted that a combination of declining inventories, a weak dollar, soaring oil demand from Asia and geopolitical risks helped to propel crude prices to 100 dollars.
Story from AFP
AFP 07 2054 GMT 01 08
Copyright© 2007 Petroleumworld. All rights reserved.
Your feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.Write to editor@petroleumworld.com
Any question or suggestions, please write to:
editor@petroleumworld.com
Best Viewed with IE 5.01+
Windows NT 4.0, '95, '98 and ME +/ 800x600 pixels