A variety of factors contributed to a drop in the price of crude oil today. Benchmark crude fell $0.53 a barrel to $101.31, about 0.5 percent, while Brent crude fell by $0.24 per barrel to $112.50. The drop in price comes despite concerns over a potential conflict with Iran and strong economic data in the United States, but ongoing concerns about European demand persist.
EU Weighing Delay in Iranian Sanctions
The European Union embargo on imports of Iranian oil has caused a great deal of controversy, with the proposed ban leading Iran to threaten closing to the Strait of Hormuz and a round of sabre rattling from both Iran and the United States. Now, though, the EU may delay the move by several months after growing concerns about the economic health of ailing member states. While the member states have agreed in principle to the ban, the specifics are still being hammered out in Brussels and should be settled by the end of the month. Diplomats are reported to have proposed "grace periods" on existing contracts of one month to a year. The proposed ban is part of a broader Western initiative to increase the pressure on Iranian leaders over its nuclear program, but domestic economic concerns appear to be another concern for the EU. "There is a range of ideas from one month to one year with countries who are more dependent on Iranian oil pushing for more time," one EU diplomat told Reuters, speaking on condition of anonymity.
Pricing Dispute with China Also Threatens Iranian Oil Exports
China is the largest importer of Iranian oil in the world, but those imports are expected to fall some 40 percent in January after a pricing dispute has arisen according to the Wall Street Journal. The China International United Petroleum & Chemicals Co., better known as Unipec, has been negotiating a new contract for condensate, a light crude used in making kerosene and other premium fuels, and those negotiations have gone on for longer than initially anticipated. The prolonged negotiations have cost Iran 220,000 barrels a day in exports to China. China has refused to join any efforts to sanction Iran because of its cozy relationship with the country. Approximately 20 percent of Iran's oil exports go to China while Iran represents the third largest source of oil for China.
Energy Stocks Show Little Movement
While news surrounding the price of crude oil seems to be coming hard and fast, major integrated oil and gas companies have shown relatively little movement in the last week. Industry leader Exxon Mobil (XOM) dropped just over 0.5 percent today to finish the week just about where it started. The Chevron Corp. (CVX) is also down over 0.5 percent Friday, gaining almost 0.75 percent for the week. Abroad, PetroChina (PTR) lost a little over 1.5 percent Friday, but posted a nearly 13 percent jump on the week, and BP (BP) dropped under 0.5 percent Friday but still gained about 1.75 percent on the week.
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