Oil drops below $100 as Saudis say they will offset Iran oil blockade, US Navy warns Iran
\nBy Associated Press, December 27, 2011<\/p>\n
NEW YORK \u2014 Oil prices fell on Wednesday, after Saudi Arabia said it will offset any loss of oil from a threatened Iranian blockade of a crucial tanker route in the Middle East.<\/p>\n
The U.S. Navy warned that any disruption of traffic through the vital Strait of Hormuz \u201cwill not be tolerated.\u201d<\/p>\n
On Tuesday Iran\u2019s vice president said that his country was ready to close the Strait of Hormuz \u2014 a vital waterway through which a third of the world\u2019s tanker traffic flows \u2014 if western nations embargo the country\u2019s oil because of Iran\u2019s ongoing nuclear program. The head of the country\u2019s navy added on Wednesday that his fleet can block the strait if need be. His comments came as Iran held a 10-day drill in international waters near the strategic route, which is 21 miles wide at its narrowest point.<\/p>\n
A Saudi oil ministry official told The Associated Press that Saudi Arabia and other Gulf producers are ready to provide more oil if Iran tries to block the strait. The official spoke on condition of anonymity because he was not authorized to discuss the issue. He didn\u2019t specify other routes that could be used to transport oil, although they would likely be longer and more expensive for getting crude to the region\u2019s customers.<\/p>\n
\u201cAnyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated,\u201d said Lt. Rebecca Rebarich, a spokeswoman for the U.S. Navy\u2019s Fifth Fleet, which is responsible for naval operations in the Persian Gulf, the Red Sea and the Arabian Sea.<\/p>\n
Some analysts think the Iranian threats are more rhetoric than reality. \u201cWe doubt political posturing will turn into action,\u201d energy consultant and trader Stephen Schork said in a report.<\/p>\n
\u201cShutting down the strait … is the last bullet that Iran has and therefore we have to express some doubt that they would do this and at the same time lose their support from China and Russia,\u201d said analyst Olivier Jakob of Petromatrix in Switzerland.<\/p>\n
Iran is the fourth largest oil exporter in the world, according to the Energy Department. Most of its crude goes to Asia, with China its biggest customer. Oil provides half of Iran\u2019s revenue. Last year that amounted to about $73 billion.<\/p>\n
In New York benchmark crude fell $1.98 to finish at $99.36 a barrel. Brent crude fell $1.71 to end at $107.56 a barrel in London.<\/p>\n
Oil prices were also undercut on Wednesday by persistent worries about Europe and future demand for oil as the region\u2019s economy weakens. The European Central Bank said the continent\u2019s banks parked a record $590.72 billion overnight with the ECB, reflecting distrust in the European banking system. …more<\/a><\/p>\n