Oil prices could find further support from release of weekly US crude stocks data
Brent crude oil steadied above $109 a barrel on Wednesday
after rallying for six straight sessions, supported by Iran's threat to halt oil
shipments through the Strait of Hormuz.
Brent was up 5 cents to $109.32 a barrel by 0345 GMT, after
climbing more than a dollar in the previous session. Prices have surged over 5
percent since Dec. 16. US crude climbed 10 cents to $101.44 a barrel.
Iran's first vice-president warned on Tuesday that the flow
of oil through the Strait of Hormuz would be stopped if foreign sanctions were
imposed on Iran's crude exports over its nuclear ambitions.
The remarks coincided with a 10-day Iranian naval exercise
in the Strait and nearby waters, a show of military force that began on
"I'm a long term bull and what we are seeing is
justification as to why you want to be in for the long term," said Greg
Smith, executive director of Global Commodities Ltd.
"The issues are not going to be resolved quickly as to
how supplies are going to be managed if we impose sanctions on Iran."
Most of the crude exported from Saudi Arabia, Iran, the
United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied
natural gas from lead exporter Qatar - must slip through the Strait of Hormuz,
a 4-mile (6.4 km) wide shipping channel between Oman and Iran.
About a third of all sea-borne oil was shipped through the
Strait in 2009, according to the US Energy Information Administration, and US
warships patrol the area to ensure safe passage.
The US State Department said it saw "an element of
bluster" in the threat.
Top oil exporter Saudi Arabia and other Gulf OPEC states
stood ready to replace Iranian oil if further sanctions halted Iranian crude
exports, industry sources said.
Oil prices could find further support from the release of
weekly US crude stocks data on Wednesday and Thursday.
Domestic crude oil inventories are expected to have fallen
for a seventh straight week as refiners delayed imports to draw down stockpiles
for year-end tax considerations, a Reuters poll ahead of weekly supply data
showed on Tuesday.
The American Petroleum Institute will publish its weekly
report at 2130 GMT on Wednesday, while data from the US Energy Information
Administration will be released on Thursday.
Crude trading volumes remained reduced in the holiday week,
with Brent volume on Tuesday 76 percent below the 30-day average.