Oil Climbs as European Union Agrees on Sanctions Against Iran

GRANT SMITH | JANUARY 2012 | SOURCE: Bloomberg Business Week

Oil rose as the European Union announced a phased-in embargo of Iranian crude in an effort to contain the Islamic Republic’s nuclear program.

The ban will be implemented in stages by July 1, Dutch Foreign Minister Uri Rosenthal told reporters today in Brussels. The region bought 450,000 barrels a day of Iran’s oil in the first half of 2011, U.S. Energy Department data show. EU finance heads are meeting to craft a long-term plan to tackle the area’s debt crisis.

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Brent oil for March settlement gained as much as $1.33, or 1.2 percent, to $111.19 a barrel and was at $111.80 a barrel at 1:37 p.m. on the ICE Futures Europe exchange in London.

On the New York Mercantile Exchange, West Texas Intermediate crude for March delivery was at $98.85 a barrel after rising as much as 1.2 percent to $99.50. Brent’s premium to WTI widened for a second day, to $11.85.

Phased-In Sanctions

“As of July 1, we have a ban on the import of oil and oil products from Iran,” the Dutch Foreign Minister said, adding that ministers will see how to “limit the damage” to Greece from the measure.

Mediterranean countries that import much of their crude from Iran, such as Greece, Spain and Italy, had argued for sanctions to be phased in over as much as a year. The three nations accounted for about 68 percent of EU imports from Iran in 2010, European Commission data show.

Saudi Arabia has unused daily production of about 2.2 million barrels a day that can be deployed to compensate, the International Energy Agency says.

The Centre for Global Energy Studies, a consultancy founded by former Saudi Oil Minister Sheikh Ahmad Zaki Yamani, and Washington-based consultant PFC Energy Inc. estimate it may be as high as 2.5 million.

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For further insight, order The Potential Impact of Further Sanctions on Iran