Proximity of ban on oil imports from Iran does not stop prices falling

25th June, 2012
Oil is on track to post its biggest quarterly fall since the financial crisis in 2008 as the eurozone crisis and weak growth in the United States roil global markets, while ample supply from the Organization of the Petroleum Exporting Countries has added to the downward pressure on prices. 

“Another round of European sovereign debt issues ... and bearish fundamentals have already started to weigh on oil prices", Morgan Stanley said in a research note.

"If OPEC production continues at today's levels, stocks would build above normal through the third quarter and supply would outstrip demand in 2012.”

The EU’s sanctions against Iran, including a ban on oil imports and a ban on the provision of insurance for tankers shipping Iranian oil, will come into force as planned on 1st July, the EU's foreign affairs chief Catherine Ashton said today. In a statement, Ashton said there would be no review of the already agreed sanctions. “There is no change in terms of how we’re going forward on July 1st,” she said. “The sanctions that have been agreed will be implemented”, Platts reports.

For its part, Bloomberg informed that oil traded below $80 a barrel for a third day in New York amid concern that Europe's debt crisis will curb demand for fuels. Futures slid as much as 1.2 percent as George Soros warned that a failure by European Union leaders meeting this week to produce drastic measures could spell the demise of the bloc’s shared currency. Developed economies are running into the limits of monetary policy, the Bank for International Settlements said in its annual report yesterday.

All of this news comes amidst a report by UPI that a stagnant U.S. economy and trouble in the eurozone is keeping demand for fuel products at lower levels, an economist from trade group API said. The American Petroleum Institute stated that U.S. gasoline demand for the first five months of the year was down 0.6 percent compared with the same period last year. API Chief Economist John Felmy said part of the slump in demand may be attributed to better fuel efficiency but most of it was because of a weak economy.

Mazhar Al-Shereidah.

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