OIL prices declined for a third trading day as concerns faded over Iran's ability to restrict world oil supplies.
Benchmark crude yesterday fell by 25 cents to end at US$101.31 per barrel in New York. Benchmark crude prices also dropped on Thursday and Friday of last week.
Brent crude, used to price foreign oil varieties that are imported by US refineries, fell by 61 cents to finish at US$112.45 per barrel in London.
Prices started 2012 on a tear as Iran conducted military exercises in the strategic Strait of Hormuz, threatening to block shipping channels in response to international sanctions. One-sixth of the world's seaborne oil passes through the narrow strait in the Persian Gulf.
Oil traders and analysts now say that concerns are easing about a potential confrontation with Iran. Military experts say it's unlikely that Iran would be able to keep tankers from exiting the Gulf, and energy analysts noted that the world remains well supplied with oil, whether or not Iran tries to block the waterway.
Morgan Stanley analysts pointed out over the weekend that producers can bypass the strait by transporting oil through pipelines in Saudi Arabia and another in the United Arab Emirates. The Saudis are expected to sell more oil to make up for any losses from Iran, and Libya has ramped up oil fields that were idled during last year's uprising.
Also, Morgan Stanley analyst Hussein Allidina said, world oil demand has declined in a number of industrialized countries including the US, Japan and Korea.
"If tension in the Mideast recedes, the premium that has been built into crude prices is likely to fade, sending crude prices lower," Allidina said in a research note.
Europe's flagging economy remains a major source of concern for oil traders. Less government spending is expected to constrict economic growth and possibly send the eurozone into recession this year. German Chancellor Angela Merkel and French President Nicolas Sarkozy met yesterday to work on ways to boost the continent's flagging economy.
In other energy trading, heating oil and gasoline both rose by less than a penny to finish at US$3.07 and US$2.76 per gallon, respectively. Natural gas fell by 5 cents to end the day at US$3.01 per 1,000 cubic feet.
Source:shanghaidaily