Oil bulls find support in possible Iran sanctions

Bloomberg goes on to say, "An embargo on Iran can be coordinated with increases from other producers, and Europe already stands to see increased imports as Libya ramps up production after the ouster of Muammar Qaddafi. The costs of an embargo can be borne. As for Iran finding other buyers, more than half its exports already go to China, India and Japan, and no country likes to be too dependent on any single producer. If Europe were to sign on to an embargo, it is not unreasonable to think Japan would feel that much more pressure to join its Western political and military allies. An embargo need not be global to put pressure on the target. We have seen this already with Iran. Industry insiders suspect that it is now or will soon offer its remaining customers oil-price discounts to stay loyal -- in part because of measures the U.S., U.K. and others have taken against Iranian financial institutions that make processing purchases more difficult." A must read in Bloomberg!

Reuters reports, "China, the biggest buyer of Iranian crude, stepped in to warn against "emotionally charged actions" that might aggravate the row over the storming of Britain's embassy in Tehran. Top U.S. officials said they wanted to sanction Iran's central bank in a calibrated manner to avoid roiling oil markets or antagonizing allies. Their approach clashes with that of U.S. lawmakers pushing for faster action. In Iran, diplomats said protesters had devastated parts of the British embassy complex in Tehran. A commander in an Iranian militia which joined Tuesday's ransacking said he was tired of decades of British "plotting" against Iran. EU foreign ministers meeting in Brussels said Iran's energy, financial and transport sectors might be targeted in response to a report from the U.N. nuclear watchdog body which suggested Iran has worked on designing an atom bomb. They added 180 Iranian people and entities to a blacklist that imposes asset freezes and travel bans on those involved in the nuclear work, which Tehran says is for peaceful purposes. But they appeared to postpone decisions on a ban on oil imports."

China wants calm because they desperately need oil. Bloomberg News reports "Rising demand for fuel oil is allowing Saudi Arabia, the world’s biggest exporter, to sell its lowest-grade crude at record premiums to buyers in Asia. Saudi Arabian Oil Co., the state-owned producer, is likely to offer Arab Heavy oil for January at 25 cents a barrel more than benchmark Oman and Dubai crude when prices are announced next week, up 50 cents from December, according to the median estimate of nine refiners surveyed by Bloomberg. Arab Medium may be set at a premium of $1.60, or 40 cents higher. That would be a record for the two grades and the first time Arab Heavy is sold at a higher price than its marker."

Still the risk to oil is very high. Dow Jones reports, "The Arab Spring and the possibility of a double-dip recession pose significant risks to the world's ability to have secure energy supplies and mitigate climate change, the chief economist of the International Energy Agency said Friday. Emissions of carbon dioxide are reaching new highs, but a recession would hamper efforts to prevent climate change, Fatih Birol said at a press briefing in Budapest. The IEA said last month that if the world doesn't adopted significant new measures to reduce CO2 emissions by 2017, dangerous climate change will be impossible to prevent." Birol also warned that the political turmoil of the Arab Spring poses a major risk to oil production in the Middle East and North Africa. There is a worrying concentration of remaining oil reserves in these risky countries, he said. Oil prices are set to remain high, he said.

Gold is also very bullish! Dow Jones reports, "The Bank of Korea's move to boost its gold reserves last month is yet another bullish flag for the bullion market and should help to provide underlying support to world gold prices. South Korea's central bank bought 15 metric tons of gold from the London gold market in several batches last month, taking its total reserves to 54.4 tons as of the end of November."

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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