Crude slips below $99 on Iran embargo delays

Oil prices slipped below $99 Friday as the European Union's plan to impose an embargo on crude shipments from Iran was expected to be delayed.

However, a possible weekend strike by oil industry workers in major oil producer Nigeria kept a floor under prices.

By early afternoon in Europe, benchmark crude for February delivery was down 15 cents to $98.95 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell sharply just before close Thursday in New York, settling $2 lower, after a report that the EU probably would not embargo Iranian oil until summer.

In London, Brent crude fell 48 cents to $110.78 per barrel on the ICE Futures exchange.

Crude prices have also been pushed up recently by pressure from the U.S on other nations to ban Iranian oil quickly in response to Iran's growing nuclear program. But an official close to the talks said Thursday that the EU probably will not embargo Iranian oil until the summer. The EU is expected to make a decision on an embargo at a Jan. 23 meeting.

"The EU is apparently thinking about delaying the oil embargo against Iran for six months to give countries time to find alternative suppliers," said analysts at Commerzbank in Frankfurt. "An immediate and total oil embargo could have led to supply bottlenecks, especially since other countries such as China and Japan are also searching for alternative suppliers."

Balanced against that were optimistic comments by the European Central Bank and solid bond auctions from Spain and Italy provided further signs of an improving economic backdrop that could result in higher demand for oil, analysts said.

"I think oil should continue to be supported going forward because we also have a general view that the U.S. dollar is going to remain weak," said Natalie Robertson, a commodities analyst at ANZ Bank in Melbourne, Australia. A weak dollar makes commodities priced in dollars appear cheaper for those spending other currencies.

There is some anxiety in the markets over a nationwide strike in Nigeria, the fifth-largest oil exporter to the U.S. Oil unions in the country are threatening to halt crude production.

"Even small changes in the assessment of supply risks can result in major price fluctuations," Commerzbank said in reference to the Nigerian situation.

In other Nymex trading, heating oil rose 0.29 cent to $3.0570 per gallon and gasoline futures added 1.25 cents at $2.7438 per gallon. Natural gas futures were down 3.8 cents to $2.659 per 1,000 cubic feet.

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Kelvin Chan in Hong Kong contributed to this report.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-01-13-Oil-Prices/id-7b90aa0e9ac945eaaae0e09ab8c10a2c

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