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US prepared for Hormuz Strait action: US defense chief
by Staff Writers
Washington (AFP) Jan 18, 2012

Oil prices ease amid demand concerns
New York (AFP) Jan 18, 2012 - Oil prices dipped Wednesday ahead of an announcement by the White House rejecting a key pipeline project, while traders weighed a reduced global demand forecast and Iran nuclear tensions.

New York's main contract, West Texas Intermediate crude for delivery in February, settled at $100.59 a barrel, a drop of 12 cents from Tuesday's closing level.

In London, Brent North Sea crude for March shed 87 cents to finish the session at 110.66 a barrel.

"WTI prices appeared directionless on Tuesday, bouncing around between $100 and $102, as the market appears to prefer a neutral stance at this point," BMO Capital Markets analysts said in a client note.

Rumors of an impending White House decision to reject the proposed Keystone XL oil pipeline from Canada had rattled the market, weighing on prices, said Phil Flynn at PFGBest.

"There is a little bit of confusion about if that is going to happen and when that is going to happen. That pushed the oil prices back down," he said.

After the New York market closed, President Barack Obama said in a statement that he was denying a permit for the Keystone XL project because the government could not complete impact studies by a February 21 deadline set by Congress.

Earlier Wednesday, the International Energy Agency cut its 2012 global oil demand growth forecast, citing a weakening world economy and stubbornly high prices as the nuclear crisis with Iran deepens.

The IEA cut its outlook for 2012 demand growth to 1.1 million barrels per day (bpd) from 1.3 million bpd.

According to the Paris-based agency, demand will be divided between declining appetite for oil in richer OECD countries, particularly in Europe, and continued growing demand in developing countries, especially Asia.

The current standoff with Iran, faced with the prospect of an European Union oil embargo, has also "further dampened prospects" for demand, along with a mild winter in the northern hemisphere, the IEA said.

In December, non-OPEC supply fell by 140,000 bpd to 53.2 million bpd due to Middle East unrest and other unplanned outages, the IEA said.

The United States is "fully prepared" for any confrontation with Iran over the strategic Strait of Hormuz, but hopes a dispute would be resolved peacefully, Defense Secretary Leon Panetta said Wednesday.

"We obviously always continue to make preparations to be prepared for any contingency, but we are not making any special steps... because we're fully prepared to deal with that situation now," Panetta told reporters.

Tehran threatened to close the strait -- a chokepoint for one-fifth of the world's traded oil -- late last month, in the event of a military strike or severe tightening of international sanctions over its disputed nuclear program.

Washington is beefing up its naval presence in waters just outside the Gulf in response to the threats.

"We have always maintained a very strong presence in that region. We have a Navy fleet located there," Panetta said.

"We have a military presence in that region... to make very clear that we were going to do everything possible to help secure the peace in that part of the world."

The defense chief said Washington has been clear on its effort to prevent Iran from obtaining a nuclear weapon and from closing the Strait of Hormuz.

"Our goal has always been to make very clear that we would hope that any differences that we have, any concerns we have can be peacefully resolved and done through international laws and international rules," he said.

"We abide by those international laws and international rules. We would hope that Iran would do the same."

He declined to comment on a report which said Washington had sent a letter to Iran regarding its threatened closure of the waterway, but said "we have channels in which we deal with the Iranians, and we continue to use those channels."

On Friday, the New York Times, citing unnamed US officials, reported that Washington had used a secret channel to warn Iran's supreme leader Ayatollah Ali Khamenei that closing the narrow strategic waterway would cross a "red line" and provoke a response.

Panetta said the postponement of joint military exercises with Israel came at the request of his Israeli counterpart, Ehud Barak.

"Minister Barak approached me and indicated that they were interested in postponing the exercise," he said.

"We looked at it and determined that in order to be able to plan better and to do this so that we would be able to conduct that exercise that it would be better to postpone."

Israeli officials said Monday the postponement was because of regional tensions and instability, and that the drill will probably take place in the second half of 2012.

The joint maneuver was to have been the biggest yet between the two allies and was seen as an opportunity to display their joint military strength at a time of growing concern about Tehran's nuclear ambitions.

But it was to come at a time of rising tensions over Iran's nuclear program, which Israel, Washington and much of the international community believe masks a weapons drive.

Iran warns gulf countries on oil exports
Washington (UPI) Jan 17, 2012 - With the economic noose poised to tighten around Iran over its suspect nuclear program, the Tehran regime is shaking a stick at Persian Gulf nations.

The specific target: Saudi Arabia, whose oil minister recently said the kingdom was willing to help make up petroleum shortfalls if international sanctions that cut off Iran's oil exports aren't only imposed but actually enforced.

"If they (Saudi Arabia and gulf states) give the green light to replacing Iran's oil, these countries would be the main culprits for whatever happens in the region …" including the Strait of Hormuz," Iran's OPEC Gov. Mohammad Ali Khatibi said.

"Our Arab neighbor countries should not cooperate with these adventurers."

Iranian Foreign Minister Ali Akbar Salehi said any such action by Riyadh wouldn't be considered "friendly" to Iran and suggested Saudi Arabia rethink its decision.

Iran and Saudi Arabia are traditional rivals and comments from both are pointedly related to representatives from the 27-member EU meeting this month over implementing new sanctions, including a banning of oil imports from the Islamic regime, against Tehran.

About 20 percent of Iran's oil exports go to Europe, about the same amount as that exported to China.

Although China opposes new sanctions on Iran, Tehran obviously hasn't missed China's demands of a price discount from Iran or a visit Saturday to Saudi Arabia by Chinese Premier Wen Jiabao, who pronounced that China and Saudi Arabia should expand cooperation in the petroleum and natural gas sectors.

The new sanctions contemplated by the European Union would be a body blow to the Iran regime, which depends on oil exports for as much as 80 percent of its foreign exchange earnings.

The Iranian economy is already is turmoil. The United States passed sanctions that bar financial institutions that do business with Iran's Central Bank from doing business with U.S. financial institutions. They aren't scheduled to take effect for months yet -- and the law has waiver provisions -- but in effect it would prevent Iran from receiving payments for its exports.

Reports from Iran indicate that amid the tensions, the country's currency is nearly in free fall and the cost of commodities climbing.

Iranian threats to close the Strait of Hormuz if sanctions are imposed against it certainly haven't calmed the waters. The strait is the main transit route for the Persian Gulf's seaborne exports -- about one-third of the world's seaborne petroleum shipments pass through it.

In a move to give Europe pause on sanctions, Iran has reminded the EU of its members' fragile economies.

"Applying the scenario of sanctions on Iran's oil exports to the EU members would be economic suicide for member countries," Khatibi said.

Whether such nudges have an impact is questionable. A report from the United Nations' International Atomic Energy Agency suggesting that Tehran is indeed working toward producing a nuclear weapon appears to have stiffened resolve to keep it from doing so.

"Our sanctions are part of trying to get Iran to change course and to enter negotiations (on its nuclear program) and we should not be deterred from implanting those," British Foreign Secretary William Hague said. "We will continue to intensify our own sanctions and those of the European Union."

Iran's nuclear intentions have been questioned for years. While the West has suspected Tehran is on a path to weapons development, Iran has insisted its nuclear fuel enrichment is for peaceful purposes, such as energy. Disclosure by Iranian dissidents of secret facilities in 2002 heightened suspicions that Tehran was being less than honest. Talks between Iran and the West sputtered along before breaking down about a year ago.

Since then a new facility has been constructed and fuel enrichment is progressing.

Both the United States and Israel, which Iran has threatened to wipe off the map, have said a military option isn't off the table in dealing with Tehran's suspected nuclear weapon ambitions, although Washington in pressuring Tel Aviv to refrain from such a move at present.

Both are also accused by Tehran of engaging in a clandestine war against it, including the introduction of a computer virus which disrupted its nuclear facilities and efforts and the assassination of its nuclear scientists and workers.

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Iraq oil minister to visit Iran over strait tensions
Baghdad (AFP) Jan 18, 2012 - Iraqi Oil Minister Abdelkarim al-Luaybi will visit Tehran on Thursday to call for an easing of tensions over crude exports passing through the Strait of Hormuz amid a showdown between Iran and the West.

Luaybi, whose country currently holds the presidency of oil cartel OPEC, will "discuss the stability of the oil market, because it affects the economy, and he will discuss keeping the entrance to the sea open," an oil ministry official told AFP.

"We are not for the use of oil in politics, because it affects people in the world," the official said.

Western governments have moved to step up sanctions on Iran over its nuclear programme, threatening an embargo on its oil exports.

The step has drawn an angry response from Tehran, which has threatened to shut the strait -- a choke point for world oil transport -- if it is attacked or heavy sanctions are imposed.

Iraq to raise oil exports capacity: minister
Baghdad, Iraq (AFP) Jan 18, 2012 - Iraq will boost its oil export capacity to 850,000 barrels per day by the end of January, which will allow it to simultaneously increase production, the country's oil minister said Wednesday.

The increase comes as part of a programme launched in 2007, which includes plans for the construction of five floating terminals in the Gulf south of Iraq.

"The first of these terminals will be inaugurated on January 25, and after a trial period of five to six days, tankers will be able to get supplies from it," Abdel Karim al-Luaybi told a news conference.

The four other terminals, fed by 60-kilometre-long (37 miles) pipelines from the coastal town of Fao, near the port city of Basra, are expected to become operational by the end of 2013.

Iraq aims to export 5 million barrels per day in 2014, according to Iraq Oil Forum editor Ruba Husari.

The country's output is currently 2.9 million bpd, out of which it exports between 1.6 and 1.7 million bpd.

"After setting this system in motion we will be able to increase production of our oil fields," currently constrained due to limited exporting capacity, added the minister.

The programme, which is being co-financed by international partners, has cost $1.5 billion (1.17 billion euros) to date.

"The ministry has prepared a plan to increased production capacity to 3.4 million bpd and raise exports to 2.6 million bpd in 2012," Luaybi said.

Oil exports account for more than 90 percent of Iraq's government income two-thirds of gross domestic product.


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