Oil: Price falls US$1 as Iran sanctions seen distant
03/02/2006
LONDON - Oil fell US$1 a barrel on Thursday as US and European leaders played down the threat of United Nations sanctions against Iran.
US light crude fell US$1.01 to US$65.55 a barrel by 1710 GMT, following a slide of over a dollar in the previous session. London Brent crude fell US$1.23 to US$63.80 a barrel.
"A bit of the premium in the oil price on Iran has been taken off today," said Craig Pennington, an analyst at investment bank Schroders. "The market interpretation (of US comments) is that there will be no sanctions and that oil won't be used."
US and European leaders, aware that Russia, China and developing nations are keen to avoid a confrontation with Iran, said Security Council involvement did not mean an end to diplomacy or that Iran would necessarily face sanctions.
"Let me be clear: we are not now seeking sanctions or other punitive measures against Iran," US Ambassador Gregory Schulte told the board of the International Atomic Energy Agency in Vienna.
The UN's nuclear watchdog inched toward reporting Iran to the UN Security Council over fears it is secretly seeking to develop atomic bombs.
On Wednesday, Iranian President Mahmoud Ahmadinejad angrily rebuffed international pressure on his country's nuclear aims hours after US President George W. Bush vowed to stop Tehran from making an atomic bomb.
"I am telling those fake superpowers that the Iranian nation became independent 27 years ago and... on the nuclear case it will resist until fully achieving its rights," Ahmadinejad told a crowd of thousands in the Gulf port city of Bushehr.
Tehran's standoff with the West has kept the market on edge for weeks over possible supply disruptions, although it has said it would not mix politics with oil.
Fear of a major supply disruption has pushed prices up over 10 per cent so far this year.
In a Reuters interview aboard Air Force One, Bush said he saw a "very good chance" the IAEA will refer Iran to the Security Council for possible sanctions.
However, consideration of such an action is not expected until after the UN's atomic watchdog presents a conclusive report on March 6.
US oil stocks
The steep drop in oil prices on Wednesday came after the US Energy Information Administration (EIA) reported a 4.2 million-barrel rise in petrol supplies in the world's largest energy consumer last week, nearly four times analysts' expectations, prompting funds and locals to take profit.
The petrol stockbuild erased a year-on-year deficit that had attracted heavy buying by funds betting on a supply crunch in the run-up to the US summer driving season.
Warm winter in the key heating oil region of the US northest has sent the country's weekly stocks up 1.8 million barrels to 59.6 million barrels, 27 per cent above year-ago levels, EIA data showed.
The world's third largest consumer Japan reported sharply lower crude inventory figures.
Japan's commercial crude oil stocks fell below 15 million kilolitres (94.5 million barrels) for the first time in more than three decades last week as refiners ran at top tilts to supply heating fuel for an unusually cold winter.
Japanese refiners have been running at peak rates around 94 per cent of capacity in the past few weeks as sales of kerosene, the main heating fuel, shot to record highs in December.
- REUTERS