Oil price falls back from 43-month high by MohamedMahmoud208


									Oil price falls back from 43-month high

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Brent Crude Oil Futures $/barrel

Last Updated at 02 Mar 2012, 13:15 GMT

price change %

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         -1.26    -1.00

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Oil prices have dipped from a 43-month high after Saudi Arabia denied reports that a key pipeline had

Brent crude fell back to $124.9 a barrel after jumping almost $6 to $128.40 in New York on Thursday. US
light crude fell slightly to $107.9.

A number of factors had pushed prices to their highest level since July 2008, including tensions over
Iran's nuclear plans and regional unrest.

Thursday's high beat the level seen during the Libyan civil war last year.

'Market nervousness'

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The sharp move up on the pipeline story points to the market nervousness on anything related to supply

Gene McGillan Tradition Energy

The problem facing the oil market at the moment is that events in a number of countries could have an
impact on supply and demand, often causing traders to react more quickly to speculation and increasing
On Thursday, the trigger was a report in Iranian media that an explosion had occurred at a pipeline in
Saudi Arabia.

The report came at a time when there has been a steady increase in friction between Iran on one side
and the United States and its allies on the other.

The US has imposed fresh sanctions against Tehran targeting the country's oil exports, while the
European Union has announced a ban on imports of Iranian oil.

For its part, Iran has threatened that it will close the Straits of Hormuz, a vital trade route for oil from
the Gulf - including Saudi oil - if the West were to impose more sanctions.

Analysts said all these issues had created an uncertainty over oil supplies and the latest reports had only
fanned those fears further.

"The sharp move up on the pipeline story points to the market nervousness on anything related to
supply problems," said Gene McGillan of Tradition Energy.

Sufficient capacity

Among the biggest buyers of Iranian oil are Asian economies such as China, Japan, India and South

The US has been trying to convince these nations to reduce their imports of Iranian oil, to put further
pressure on Tehran.

Earlier this year, US Treasury Secretary Timothy Geithner visited China and Japan to drum up support for
US sanctions.

But there have been concerns that if nations stop buying oil from Iran they will have to turn to other oil
producers in order to meet their demand, pushing up prices and hurting global economic growth.

However, US authorities tried to allay those fears, saying that global oil producers were well placed to
make up for any shortfall in Iranian oil.

"I think there is sufficient spare capacity," said Steven Chu, US Energy Secretary.

At the same time, some analysts said that change in global weather may also help in keeping oil prices in

"Oil prices have overshot in the short-term, and with warmer temperatures as we move from winter to
spring, oil demand could start to fall, starting in March," said Gordon Kwan, head of energy research at
Mirae Asset Management in Hong Kong.

"Brent could fall back below $120 (per barrel) if Iran doesn't flare up."

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