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Iran and the price of oil - Jan 3

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Iran Warns the United States Over Aircraft Carrier

J. David Goodman, New York Times
Iran’s military sharpened its tone toward the United States on Tuesday, bluntly warning an American aircraft carrier that left the Persian Gulf through the strategic Strait of Hormuz last week not to return.

The warning, by Iran’s army chief, was the latest and most aggressive volley in a nearly daily exchange of barbed statements between Iran and the United States. Iran has just finished ambitious naval exercises near the strait, and it has repeatedly threatened to close the passage — through which roughly one fifth of the oil traded worldwide passes — if Western powers move forward on new sanctions on Iran’s petroleum exports.
(3 January 2012)
Related: Iran warns U.S. carrier not to return to Persian Gulf (Washington Post)

Oil up 3 percent on Iran warning and U.S., China data

Robert Gibbons, Reuters
Oil price rose more than 3 percent on Tuesday as tension between Iran and the United States kept fears of potential supply disruptions in focus and with Chinese and U.S. economic data also supportive at the start of 2012 trading.

Iran threatened to take action if the U.S. Navy moves an aircraft carrier into the Gulf, the most aggressive statement yet from Tehran after weeks of saber-rattling as new U.S. and European Union financial sanctions take a toll on Iran's economy.
(3 January 2012)
From Guardian/AP: Oil prices soar as Iran warns US aircraft carrier away from Persian Gulf.

Iran risk accounts for up to $10-15 of oil price: Reuters' Kemp

Oil jumps nearly 3% on rising US-Iran tension, but political risk is the only real major support for oil right now.

(3 January 2012)
"Q: In previous years, this amount of tension would have triggered a higher price in oil, why not now?

Reuters analyst John Kemp: I think the market is very skeptical about whether or not a confrontation will ensue."

2012 Outlook: Crude Oil Prices Could Rise This Year, But Prices Could Be Very Volatile

Kitco News, Forbes
Crude oil prices could rise again this year, but how much and how far depend on a multitude of factors, including economic growth, what happens with Europe and geopolitical issues.

Demand from emerging markets should stay firm and there are numerous supply-side risks because of geopolitical issues. Because there are so many potential influences in the oil market, both from its own fundamentals and outside influences, that market analysts advise potential investors to be nimble and pay attention.
(3 January 2012)

Conflict in Straits of Hormuz? $200 a Barrel Oil?

John Daly,
The pieces and policies for potential conflict in the Persian Gulf are seemingly drawing inexorably together.

Since 24 December the Iranian Navy has been holding its ten-day Velayat 90 naval exercises, covering an area in the Arabian Sea stretching from east of the Strait of Hormuz entrance to the Persian Gulf to the Gulf of Aden. The day the maneuvers opened Iranian Navy Commander Rear Admiral Habibollah Sayyari told a press conference that the exercises were intended to show "Iran's military prowess and defense capabilities in international waters, convey a message of peace and friendship to regional countries, and test the newest military equipment." The exercise is Iran's first naval training drill since May 2010, when the country held its Velayat 89 naval maneuvers in the same area. Velayat 90 is the largest naval exercise the country has ever held.

The participating Iranian forces have been divided into two groups, blue and orange, with the blue group representing Iranian forces and orange the enemy. Velayat 90 is involving the full panoply of Iranian naval force, with destroyers, missile boats, logistical support ships, hovercraft, aircraft, drones and advanced coastal missiles and torpedoes all being deployed. Tactics include mine-laying exercises and preparations for chemical attack. Iranian naval commandos, marines and divers are also participating.

The exercises have put Iranian warships in close proximity to vessels of the United States Fifth Fleet, based in Bahrain, which patrols some of the same waters, including the Strait of Hormuz, a 21 mile-wide waterway at its narrowest point. Roughly 40 percent of the world's oil tanker shipments transit the strait daily, carrying 15.5 million barrels of Saudi, Iraqi, Iranian, Kuwaiti, Bahraini, Qatari and United Arab Emirates crude oil, leading the United States Energy Information Administration to label the Strait of Hormuz "the world's most important oil chokepoint."

... How serious are the Iranians about the proposed sanctions and possible attack over its civilian nuclear program and what can they deploy if push comes to shove? According to the International Institute for Strategic Studies’ The Military Balance 2011, Iran has 23 submarines, 100+ “coastal and combat” patrol craft, 5 mine warfare and anti-mine craft, 13 amphibious landing vessels and 26 “logistics and support” ships. Add to that the fact that Iran has emphasized that it has developed indigenous “asymmetrical warfare” naval doctrines, and it is anything but clear what form Iran’s naval response to sanctions or attack could take. The only certainty is that it is unlikely to resemble anything taught at the U.S. Naval Academy.

The proposed Obama administration energy sanctions heighten the risk of confrontation and carry the possibility of immense economic disruption from soaring oil prices, given the unpredictability of the Iranian response. Addressing the possibility of tightened oil sanctions Iran’s first vice president Mohammad-Reza Rahimi on 27 December said, “If they impose
(3 January 2012)
I feel uneasy about the headline at the original, "War Imminent in Straits of Hormuz?". Journalistic outlets need to be very careful about raising the spectre of war. -BA

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