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Oil Market Still Ignores Unrest in Iran, but This Could Change Easily |
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Wednesday, 01 July 2009 |
 The permanent fear of lower demand and technical reasons send oil prices in the beginning of the week at $66.93 per barrel widening the gap between the real price and OPEC’s target of $75 per barrel. Oil prices lost in just one day 3.8% of their value and it was the lowest closing price since June 3, when crude settled at $66.12 a barrel.
The retreat comes despite ongoing political unrest in Iran, militant attacks on oil installations in Nigeria and escalating tensions with North Korea.
According to market analysts that happened because investors close
their positions for July as oil delivery replaced July as the active
contract Monday. August contracts ended at $67.50 per barrel, with
losses of $2.52.
For the moment, the markets seem to ignore the unrest in Iran, and
crude prices look to focus on the economic front and the effect that
recession has on demand. But some market analysts warn that if the
unrest continues in Tehran this can change.
Demonstrations continued in Iran Monday after at least 19 people were
killed last Saturday during street protests over the results of the
country's June 12 presidential election.
As the market appeared to have a lot of spare capacity, the fears from
a disruption on Iran’s production remain limited. But this could change
easily if the opposition manages to pull off a national strike that
could potentially spread to the oil sector. This evolution could send
oil prices over $80 per barrel, threatening directly the prospect of
rebound for the world economy. The Islamic republic produces about 3.8
million barrels of crude oil per day and is the third biggest global
oil exporter after Russia and Saudi Arabia.
Analysts fear the biggest crisis since the 1979 revolution could force
the Iranian government to cut off oil supplies or block the Strait of
Hormuz -- a crucial passageway for oil tankers.
"There could be a rude awakening (for the oil market) if tensions in
Iran escalate further," said VTB Capital analyst Andrey Kryuchenkov.
"Not only does the country pump a significant amount of OPEC crude, it
also controls the Strait of Hormuz through which around 40 percent of
global seaborne oil flows daily."
The opposition has been staging almost daily rallies to protest at
alleged fraud and widespread irregularities in Iran's election which
returned hardline President Mahmoud Ahmadinejad to power for another
four years.
But oil prices have fallen heavily since the election, dampened by the dire global economic outlook and a stronger dollar.
"Needless to say, the odds arrayed against the opposition are daunting,
as many of its leaders are jailed, while communications among the
remaining are severely hampered and monitored."Nevertheless, the
situation remains very fluid and anything is possible at this stage." A
trader in New York Merchandise Exchange said yesterday.
Makis Theodoratos, Hellenic Shipping News
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