Oil price falls back from 43-month high

Last Updated at 02 Mar 2012, 10:15 GMT

Oil prices have dipped from a 43-month high after Saudi Arabia denied reports that a key pipeline had exploded.

Brent crude fell back to $125.6 a barrel after jumping almost $6 to $128.40 in New York on Thursday. US light crude fell slightly to $108.5.

A number of factors had pushed prices to their highest level since July 2008, including tensions over Iran's nuclear plans and regional unrest.

Thursday's high beat the level seen during the Libyan civil war last year.

'Market nervousness'

The problem facing the oil market at the moment is that events in a number of countries could have an impact on supply and demand, often causing traders to react more quickly to speculation and increasing volatility.

On Thursday, the trigger was a report in Iranian media that an explosion had occurred at a pipeline in Saudi Arabia.

The report came at a time when there has been a steady increase in friction between Iran on one side and the United States and its allies on the other.

The US has imposed fresh sanctions against Tehran targeting the country's oil exports, while the European Union has announced a ban on imports of Iranian oil.

For its part, Iran has threatened that it will close the Straits of Hormuz, a vital trade route for oil from the Gulf - including Saudi oil - if the West were to impose more sanctions.

Analysts said all these issues had created an uncertainty over oil supplies and the latest reports had only fanned those fears further.

"The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems," said Gene McGillan of Tradition Energy.

Sufficient capacity

Among the biggest buyers of Iranian oil are Asian economies such as China, Japan, India and South Korea.

The US has been trying to convince these nations to reduce their imports of Iranian oil, to put further pressure on Tehran.

Earlier this year, US Treasury Secretary Timothy Geithner visited China and Japan to drum up support for US sanctions.

But there have been concerns that if nations stop buying oil from Iran they will have to turn to other oil producers in order to meet their demand, pushing up prices and hurting global economic growth.

However, US authorities tried to allay those fears, saying that global oil producers were well placed to make up for any shortfall in Iranian oil.

"I think there is sufficient spare capacity," said Steven Chu, US Energy Secretary.

At the same time, some analysts said that change in global weather may also help in keeping oil prices in check.

"Oil prices have overshot in the short-term, and with warmer temperatures as we move from winter to spring, oil demand could start to fall, starting in March," said Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong.

"Brent could fall back below $120 (per barrel) if Iran doesn't flare up."  

 News By BBC

Read more current news at http://bbc-cnn-worldnews.blogspot.com

Iran calls for Israel to be "punished"

(Reuters) - Major powers signaled on Friday their willingness to reopen talks about curbing Iran's suspected pursuit of nuclear weapons but said Tehran must show it is serious about any negotiations.

The focus on diplomacy follows weeks of rising tensions between the West, which is seeking to cut Iran's oil sales, and Tehran, which has threatened to close the Strait of Hormuz through which almost one-fifth of oil traded worldwide flows.

Alarmed Arab neighbors made a plea to avoid escalating the dispute over Iran's nuclear program while an ally of Iran's supreme leader called for Israel to be "punished" for allegedly killing an Iranian nuclear scientist.

The West suspects Iran is using its civilian nuclear program as a cover to develop atomic weapons and has pursued a two-track approach of sanctions and diplomacy to try to rein it in. Iran says its nuclear program is solely to produce electricity.

While major powers stressed their openness to renewed talks,

diplomats said they remain divided on their approach, notably on whether to let Iran keep enriching uranium at some level.

The group, known as the P5+1 and as the EU3+3, includes Britain, China, France, Germany, Russia and the United States.

EU foreign policy chief Catherine Ashton, who represents the group, issued a statement making clear that a diplomatic path remains open to Iran despite tougher sanctions and fresh speculation of a military strike on its nuclear facilities.

"The EU3+3 has always been clear about the validity of the dual track approach," Ashton's spokesperson said in a statement that included her October 21 letter to the Iranians laying out the possibility of talks. "We are waiting for the Iranian reaction."

The release of the statement and letter appeared to reflect frustration at Iran's statements hinting at a willingness to resume talks but Tehran's failure to formally respond to the letter and commit to discussing the nuclear program in earnest.

CONCILIATORY TONE FROM CLINTON

U.S. Secretary of State Hillary Clinton struck a decidedly conciliatory tone at a news conference with German Foreign Minister Guido Westerwelle in Washington.

"We do not seek conflict. We strongly believe the people of Iran deserve a better future," she said. "They can have that future, the country can be reintegrated into the global community ... when their government definitively turns away from pursuing nuclear weapons.

"We have to see a seriousness and sincerity of purpose coming from them."

Westerwelle said, "One thing is clear: the door for serious dialogue remains open but the option of nuclear weapons in Iran is not acceptable."

Diplomats said major powers are divided over what incentives to offer Iran if talks were to resume.

A central issue is whether the group might ask Iran to cease enriching uranium to the higher level of 20 percent but allow it, at least for a time, to continue enriching at lower levels -

a stance partly at odds with the group's past positions.

Uranium enrichment is a process that at low levels can yield fuel for nuclear power plants or, if carried out to much higher levels of purity, can generate fissile material for bombs.

To let Iran enrich at lower levels would be something of a concession by the P5+1, although it has previously offered a temporary "freeze-for-freeze" in which Iran would not expand its nuclear program and the powers would not pursue more sanctions.


IRANIAN CALLS FOR PUNISHING ISRAEL

After Supreme Leader Ayatollah Ali Khamenei paid his respects to the families of two scientists assassinated on what Tehran believes were Israel's orders, one of them just last week, a close ally demanded retribution.

"Terrorism has a long history in some countries like the Zionist regime," Ali Larijani, speaker of Iran's parliament and a former nuclear negotiator, said Israel, which views an atomic bomb in Iran's hands as a threat to its survival.

"The Zionist regime should be punished in a way that it can not play such games with our country again."

Such threats have been made before in Tehran and it is unclear how or when they might be carried out. Israel, widely assumed to have the only nuclear arsenal in the Middle East, is on guard against attacks on its borders and within, notably by Lebanon's Hezbollah movement, which is supported by Iran.

Obama's top military official, chairman of the Joint Chiefs of Staff General Martin Dempsey, briefly visited Israel and was quoted by its Defense Ministry as telling officials there that Washington was keen to coordinate on strategy.

"We have many interests in common in the region in this very dynamic time and the more we can continue to engage each other, the better off we'll all be," Dempsey was quoted as saying in a statement issued by the Israeli Defense Ministry.

The comments may reflect U.S. concerns about the possibility that Israel, which has previously bombed nuclear facilities in Iraq and in Syria, might launch an attack on Iran.

French President Nicolas Sarkozy said on Friday that time was running out to avoid a military intervention and appealed to China and Russia, veto-wielding U.N. powers who have been reluctant to tighten sanctions, to support new sanctions.

"Time is running out. France will do everything to avoid a military intervention," Sarkozy told ambassadors gathered in Paris. "A military intervention will not solve the problem, but it will unleash war and chaos in the Middle East."

"We need stronger, more decisive sanctions that stop the purchase of Iranian oil and freezes the assets of the central bank, and those who don't want that will be responsible for the risks of a military conflict," Sarkozy warned.

"We really need you," he said in an appeal to Moscow and Beijing.

With tensions, including mutual threats of disrupting the oil trade, creating worries across the region, the foreign minister of the United Arab Emirates, the wealthy, U.S.-allied state sitting across the Gulf from Iran, offered a warm welcome to a call for calm on Thursday by his Iranian counterpart.

"It's important to get far away from any escalation and we stress the stability of the region," Sheikh Abdullah bin Zayed al-Nahayan was quoted as saying by state news agency WAM.

Read current news at http://bbc-cnn-worldnews.blogspot.com

Iran blast kills nuclear scientist

Bomb kills Iran nuclear scientist

(Reuters) - An Iranian nuclear scientist was blown up in his car by a motorbike hitman, prompting Tehran to blame Israeli and U.S. agents but insist the killing would not derail a nuclear program that has raised fears of war and threatened world oil supplies.

The fifth daylight attack on technical experts in two years, the magnetic bomb delivered a targeted blast to the door of 32-year-old Mostafa Ahmadi-Roshan's car during Wednesday's morning rush-hour. The chemical engineer's driver also died, Iranian media said, and a passer-by was slightly hurt.

Israel, whose military chief said on Tuesday that Iran could expect to suffer more mysterious mishaps, declined comment. The White House, struggling for Chinese and Russian help on economic sanctions, denied any U.S. role and condemned the attack.

While Israeli or Western involvement seemed eminently plausible to independent analysts, a role for local Iranian factions or other regional interests engaged in a deadly shadow war of bluff and sabotage could not be ruled out.

The killing, which left debris hanging in trees and body parts on the road, came in a week of heightened tension:

Iran has started an underground uranium enrichment plant and sentenced an American to death for spying; Washington and Europe have stepped up efforts to cripple Iran's oil exports for its refusal to halt work that the West says betrays an ambition to build nuclear weapons. Iran says its aims are entirely peaceful.

Tehran has threatened to choke the West's supply of Gulf oil if its exports are hit by sanctions, drawing a U.S. warning that its navy was ready to open fire to prevent any blockade of the strategic Strait of Hormuz, through which 35 percent of the world's seaborne traded oil passes.

Secretary of State Hillary Clinton said Iran's threats to close the strait were "provocative and dangerous" and repeated the White House denial of any U.S. involvement in the killing of Ahmadi-Roshan.

In Tokyo on Thursday, Japanese Finance Minister Jun Azumi pledged after talks with U.S. Treasury Secretary Timothy Geithner to steadily reduce oil imports from Iran in support of U.S. sanctions on Tehran over its nuclear program.

Geithner welcomed Tokyo's cooperation, which could be an encouraging sign for U.S. policy after China, a big buyer of Iranian crude, and Russia rebuffed U.S. appeals to starve Iran of much-needed revenue from oil sales.

On a visit to Cuba on Wednesday, Iranian President Mahmoud Ahmadinejad said nothing about the bomb attack but flashed the victory sign and said Iran had done nothing to warrant enmity from its enemies.

"Have we assaulted someone? Have we wanted more than we should have? Never, never. We have only asked to speak about and establish justice," said Ahmadinejad.

Analysts saw the latest assassination, which would have taken no little expertise, as less a reaction to recent events than part of a longer-running, covert effort to thwart Iran's nuclear development program that has also included suspected computer viruses and mystery explosions.

While fears of war have forced up oil prices, the region has seen periods of saber-rattling and limited bloodshed before without reaching all-out conflict. But a willingness in Israel, which sees an imminent Iranian atom bomb as a threat to its existence, to attack Iranian nuclear sites, with or without U.S. backing, has heightened the sense that a crisis is coming.

"HEINOUS ACT"

The Atomic Energy Organization of Iran, which has failed to persuade the West that its quest for nuclear power has no hidden military goal, said the killing of Ahmadi-Roshan would not deter it: "We will continue our path without any doubt ... Our path is irreversible," it said in a statement carried on television.

"The heinous acts of America and the criminal Zionist regime will not disrupt our glorious path ... The more you kill us, the more our nation will awake."

First Vice-President Mohammad Reza Rahimi, quoted by IRNA news agency, said: "Iran's enemies should know they cannot prevent Iran's progress by carrying out such terrorist acts."

Iran's leaders, preparing for the first national election since a disputed presidential vote in 2009 brought street protests against 32 years of clerical rule, are struggling to contain internal tensions. Defiance of Israel and Western powers plays well with many who will vote in March.

In Washington, White House spokesman Tommy Vietor said: "The United States had absolutely nothing to do with this ... We strongly condemn all acts of violence, including acts of violence like what is being reported today."

Israel, which has a history of covert killings abroad, declined comment, though army spokesman Yoav Mordechai wrote on Facebook: "I don't know who settled the score with the Iranian scientist, but I am definitely not shedding any tears."

MOTORCYCLE HITMAN

The attack bore some of the hallmarks of sophisticated intelligence agencies capable of circumventing Iran's own extensive security apparatus and apparently taking care to limit the harm to passers-by.

While witnesses spoke of a frighteningly loud explosion and parts of the Peugeot 405 ended up in the branches of the trees lining Gol Nabi Street, much of the car was left intact. This suggested a charge designed to be sure of both killing the occupants and preventing serious injury to others.

Witnesses said the motorcycle, from which the rear pillion passenger reached out to stick the device to the side of the car, made off into the heavy commuter traffic.

Though the scientist killed -- the fourth in five such attacks since January 2010 -- was only 32, Iranian media described him as having a role overseeing uranium enrichment at Natanz underground site. The semi-official news agency Mehr said Ahmadi-Roshan had recently met officials of the U.N. nuclear watchdog, the International Atomic Energy Agency.

At the IAEA in Vienna, where a spokeswoman condemned the killing, officials could not confirm knowing of him.

Analysts say that killing scientists -- especially those whose lack of personal protection suggests a relatively junior role -- is unlikely to have much direct impact on Iran's nuclear program, which Western governments allege is seeking to enrich enough uranium highly enough to let it build weapons.

COVERT WAR

Sabotage -- like mysterious reported explosions at military facilities or the Stuxnet computer virus widely suspected to have been deployed by Israel and the United States to disrupt nuclear facilities in 2010 -- may have had more direct effects.

However, assassinations may be intended to discourage Iranians with nuclear expertise from working on the program.

Bruno Tertrais from France's Strategic Research Foundation said: "It certainly has a psychological effect on scientists working on the nuclear program."

He cautioned, however, against assuming that Israel, the United States or both were behind the latest attack.

Trita Parsi, a U.S.-based expert on Iran, said the killing might, along with the heightened rhetoric of recent weeks, be part of a pattern ahead of a possible resumption of negotiations on Iran's nuclear program; some parties may want to improve their bargaining position, others may see violence as a way of thwarting renewed negotiations altogether, Parsi said.

Last month, Iran signaled a willingness to return to a negotiating process which stalled a year ago, though Western officials say a new round of talks is far from certain yet.

SANCTIONS CAMPAIGN

Iran's decision to carry out enrichment work deep underground in the once undeclared plant at Fordow, near the holy Shi'ite city of Qom, could make it harder for U.S. or Israeli forces to carry out veiled threats to use force against Iranian nuclear facilities. The move to Fordow could reduce the time available for diplomacy to avert any attack.

The announcement on Monday that enrichment -- a necessary step to make uranium into nuclear weapons -- had begun at Fordow has given added impetus to Western efforts to impose an oil export embargo intended to pressure Tehran to halt enrichment.

Iran, a signatory to the treaty banning the spread of nuclear weapons, says it is entitled to conduct peaceful research and denies any military nuclear aims. Its adversaries say its failure to take up their offers of help with civilian technology undermine the credibility of its position.

Oil prices have firmed 5 percent since U.S. President Barack Obama moved on New Year's Eve to block bank payments for oil to Iran. The European Union is expected this month to impose a ban on its states buying oil from Tehran, and other major customers have been looking for alternative supplies.

In Iran, the new U.S. sanctions have started to bite.

The rial currency has lost 20 percent of its value against the dollar in the past week and Iran has threatened to shut the Strait of Hormuz.

Read current news at http://bbc-cnn-worldnews.blogspot.com

Hormuz Bypass Oil Pipeline Delayed as Iranian Tensions Mount

Ships load fuel at an oil products storage terminal in Fujairah

A pipeline that would allow oil from the United Arab Emirates to bypass the Strait of Hormuz separating it from Iran has been delayed because of construction difficulties, two people with knowledge of the matter said.

As many as 270 construction issues have pushed back the completion date, said the two people, declining to be identified because they’re not allowed to speak publicly on the matter. The $3.3 billion project won’t be ready until at least April, one of them said. Abu Dhabi, holder of the U.A.E.’s oil reserves, had planned to start exports in January 2011 through the pipeline to a port outside the strait, Dieter Blauberg, the project’s former director, said in May 2009.

The 1.5 million barrel-a-day link would ensure the U.A.E. can export crude without risking a blockade at Hormuz, where fully laden tankers exit the Persian Gulf with one-fifth of the world’s traded oil. The chance that Iran might try to close the waterway intensified as Europe prepares to follow tougher U.S. sanctions on the country.

“That pipeline would carry pretty much all of Abu Dhabi’s oil,” Robin Mills, an analyst at Manaar Energy Consulting in Dubai, said Jan. 5. “It’s a critical bit of infrastructure, and it is remarkable it hasn’t been completed.”

The strait, 21 miles wide at its narrowest point, has 14 crude tankers passing through it each day on average, according to the U.S. Energy Information Administration.
Important Chokepoint

Most of the oil exports from Saudi Arabia, OPEC’s biggest producer, as well as crude from Iraq, Kuwait, the U.A.E., Qatar and Iran itself must pass through the waterway, making Hormuz the world’s most important chokepoint with a daily flow of 17 million barrels a day last year, according to EIA data.

An official at International Petroleum Investment Co., the pipeline’s owner, declined to say when the project would start when asked by Bloomberg on Jan. 3 and the company didn’t respond to an earlier e-mail seeking comment. China Petroleum Engineering & Construction Corp., the pipeline’s contractor, didn’t respond to a fax seeking comment on Dec. 15, and a spokesman for its parent China National Petroleum Corp. declined to comment when Bloomberg contacted him that day by phone.

An official at Abu Dhabi Co. for Onshore Oil Operations, or ADCO, the state company assigned to operate the pipeline, referred all inquiries to IPIC, speaking by phone on Jan. 6. Abu Dhabi National Oil Co., or Adnoc, which owns 60 percent of ADCO, did not respond to questions e-mailed on Dec. 21 and public relations officials had no immediate response when contacted by phone that day and on Dec. 22 and Jan. 3.
Across Desert, Mountains

Among ADCO’s minority shareholders, Royal Dutch Shell Plc (RDSA) declined to comment in a Dec. 21 e-mail, as did Exxon Mobil Corp. (XOM) while BP Plc (BP/) declined to comment in a Jan. 3 e-mail and a Partex Oil and Gas official declined to comment by phone on Jan. 4. Total SA (FP) didn’t respond to Dec. 21 e-mail seeking comment.

Once ready, the pipeline will transport crude from Habshan, the collection point for Abu Dhabi’s onshore oil fields, over 230 miles (370 kilometers) of desert and razorback mountains to the port of Fujairah, on the U.A.E.’s eastern coast, facing the Gulf of Oman. The project’s declared aim is to “offset reliance” on Gulf terminals while reducing shipping congestion, according to IPIC, the Abu Dhabi government-run owner.

The line terminates at a kilometer-long (0.6 mile-long) site containing eight white storage tanks and pipes stacked four high over the length of a football field, nestled at the foot of the Hajar Mountains.

Tankers will also save two days sailing time, worth about $38,000, by loading at Fujairah instead of Abu Dhabi, according to data provided by Clarkson Research Services Ltd.
Almost Ready

IPIC initially planned to begin filling the pipeline in September 2010 then load cargoes the following January, Blauberg said in 2009. It later pushed back the start without explanation, saying in a bond prospectus on Oct. 19, 2011, that it expected to deliver first oil in “early 2012.”

The U.S. tightened economic sanctions against Iran over its nuclear program on Dec. 31, and the European Union is weighing a ban later this month on purchases of Iranian crude. Iran held 10 days of naval maneuvers east of Hormuz ending Jan. 3 and warned it would block the strait if prevented from selling its oil, according to Iranian state-run news agencies. Brent crude futures have risen 5 percent so far this month to $133 a barrel.

A potential Hormuz blockade “still remains the ultimate fear in the oil market,” Barclays Plc said in a Jan. 5 note.

‘Tanker War’

Should the Hormuz be closed to ships, the pipeline alone won’t prevent price rallies because most of the oil from the Gulf would still be stopped, Kamel al-Harami, an independent oil analyst said by phone from London on Jan. 6.

Weeks of Iran tension has added about $10 a barrel to Brent crude prices, said al-Harami, who was head of crude and products marketing at state-run Kuwait Petroleum Corp. during the 1980s “Tanker War” when Iran and Iraq attacked each other’s ships.

Still, a closure of the strait by Iran, in response to opposition to the nation’s nuclear program, is not a “high- likelihood event,” David Fyfe, head of the International Energy Agency’s oil market and industry division, said in a Jan. 4 telephone interview from Paris.

A Jan. 5 visit to the Fujairah site marked by a black-and- white sign saying “Abu Dhabi Pipeline Co. Oil Terminal,” showed construction workers in blue overalls and hardhats shuttled into and out of the oil storage facility by bus.

Khaled al-Raeesi, a public relations and securities officer for China Petroleum Engineering & Construction, declined to comment on the pipeline’s status, when questioned at the site that day, deferring all questions to IPIC. Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al Nahyan visited the project last month, he said.

News by Bloomberg


Read current news at http://bbc-cnn-worldnews.blogspot.com