Oil prices were down in Asian trade today on concerns that the European debt crisis could worsen, analysts said, amid tensions over Iran’s threat to block a vital oil shipping lane.
New York’s main contract, West Texas Intermediate for delivery in February, was down 49 cents to $101.07 in the morning trade, while Brent North Sea crude for February delivery declined 11 cents to $112.95.
“Pressures concerning the debt situation in Europe is offsetting the bullish factor of geopolitical tension in the Middle East,” said Mr Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.
French and German leaders are set to meet in Berlin today, kicking off a week of high-level talks aimed at laying the groundwork to tame the euro zone crisis.
The talks are being held amid growing strategic differences between the two European powers over plans to introduce a financial transaction tax in the European Union.
Traders, meanwhile, are also keeping a close watch on the situation in the strategic Strait of Hormuz in West Asia and its impact on the flow of oil supplies, analysts said.
Iran has threatened to close the key transit point if the European Union slaps an embargo on its oil imports as part of sanctions to stop Tehran from developing its nuclear programme. The country has denied allegations it was building atomic weapons.
“It is understood that Western powers have readied a contingency plan to tap a record volume from emergency reserves to replace nearly all the Gulf oil that would be lost if Iran blocks the Strait of Hormuz,” Phillip Futures said in a market commentary.
US Defence Secretary, Mr Leon Panetta, yesterday warned that the United States would take action if Tehran tries to close the vital Strait.
“I think they need to know that if they take that step that they’re going to get stopped,” Mr Panetta told CBS television.