Oil prices fell this evening following news of a bigger-than-expected jump in US crude inventories.
New York's main contract, West Texas Intermediate crude for delivery in March, dropped 23 cents to $98.72 a barrel. Brent North Sea crude for March slipped 14 cents to $109.89 in late London deals.
The US Department of Energy said that the country's crude stockpiles jumped by 3.6 million barrels last week - five times the amount expected by analysts - and indicating weak demand in the world's biggest consumer of oil.
Oil markets were also tracking tensions between Iran and the West after the European Union this week imposed a ban on the Islamic Republic's oil imports and of assets owned by the Islamic Republic's central bank.
The move, aimed at dissuading Iran from building a nuclear weapon, could see the major oil exporter react by closing the strategic Strait of Hormuz. The narrow waterway that links the oil-rich Gulf with the Arabian Sea and beyond is crucial to the global economy, as about 40% of global oil exports pass through it.
Hormuz closure would send oil prices soaring - IMF
Any blockade of the strategic Strait of Hormuz by Iran would send oil prices soaring by more than $30 a barrel, the IMF said in a report released today.
The International Monetary Fund made the warning last week in a document prepared for a meeting of G-20 deputy finance ministers in Mexico, naming it as a key risk for the already shaky global economy as the West increases pressure on Tehran over its suspect nuclear programme.
The Fund said that a somewhat broad embargo on Iranian oil, effectively taking 1.5 million barrels a day of Iran's exports off the global market without another producer compensating for it, risked pushing the market price for oil up 20-30%, "about $20-30 a barrel currently."
"A Strait of Hormuz closure could trigger a much larger price spike, including by limiting offsetting supplies from other producers in the region," the report said.
Iran has threatened several times in recent months that if Europe, the US and their allies try to shut down the country's oil exports, it would close the narrow Hormuz strait.
The waterway which links the oil-rich Gulf with the Arabian Sea and beyond is crucial to the global economy, as about 40% of global oil exports pass through it.
Pressure grew this week on Tehran after the European Union agreed to halt imports of Iranian crude, closing off an outlet for about 600,000 barrels a day. Saudi Arabia has stepped up production to compensate for that loss, and could match more market shortfalls if pressure on other countries like China and India to stop buying Iran's oil is successful.
But, the IMF warned, the Saudi buffer is also at risk with a Hormuz closure. "A blockade of the Strait of Hormuz would constitute, and be perceived by markets to presage sharply heightened global geopolitical tension involving a much larger and unprecedented disruption,'' it said.
