Oil Rises on Fears of Iranian Action in the Gulf

By Newsroom America Staff at 28 Dec 2011

UPDATE: (Newsroom America) -- Oil prices retreated Wednesday after Saudi Arabia pledged to offset any oil lost from a threatened Iranian blockade of the Strait of Hormuz.

On Wall Street, benchmark crude fell 77 cents to $100.57 a barrel. Brent crude fell 82 cents to $108.45 a barrel in London.

Iran has threatened to close the strategic oil transport waterway if the West imposed an oil embargo against Tehran.

Saudi Arabia and other Gulf nations have said they would provide additional oil if needed, The Associated Press reported.

BREAKING NEWS UPDATE. Newsroom America's earlier story is below.

(Newsroom America) -- The price of a barrel of oil crept upward Tuesday following statements by a high-ranking Iranian official threatening to close the strategic Strait of Hormuz if the West imposed an oil embargo against Tehran.

"If they [the West] impose sanctions on Iran’s oil exports, then not even one drop of oil can flow through the Strait of Hormuz," Mohammad Reza Rahimi, Iran’s first vice-president, said in comments published by IRNA, Iran's official news agency.

Iranian officials have threatened to shut down oil flow through the Strait in the past but Rahimi's comments are the strongest yet.

Britain, France and Germany support imposing the embargo, but Greece and other countries have some reservations about it, the Financial Times reported, adding that EU foreign ministers are scheduled to consider the embargo during a January 30 meeting.

Some analysts believe Rahimi's bellicose warning could be an attempt to boost the image of President Mahmoud Ahmadnejad, whose regime is engaged in an intense power struggle with Iran's conservative Revolutionary Guards, ahead of parliamentary elections in March. Only the Guards can order the Strait closed, and it was unclear if Rahimi's statements had any official backing, FT reported.

In response to Rehimi's bellicose warning, ICE February Brent, the global benchmark, rose $1.21 to $109.17 a barrel in London Tuesday. Meanwhile, on Wall Street, NYMEX February West Texas Intermediate rose $1.47 to $101.15 a barrel.

Other analysts noted that it would be difficult, if not impossible, for Iran to close the strategic waterway.

Some 12-15 oil tankers pass through the Strait daily.

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