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March 15, 2012 4:14 pm
Oil prices fell sharply on Thursday after Reuters news agency reported that the US and the UK were working on a deal to release their strategic petroleum reserves.
ICE April Brent fell to a session’s low of $120.97 a barrel, the lowest level in two weeks, although it later pared losses to trade $1.97 down to $122.90 a barrel. Nymex April West Texas Intermediate fell to $104.29 a barrel.
The UK has decided to co-operate with the US in a bilateral agreement to release strategic oil stocks, Reuters quoted two British sources as saying, in an effort to prevent high fuel prices derailing economic growth in a US election year.
Brent crude oil prices hit a post-2008 high of $128.4 a barrel earlier this month after a false report about an explosion in a pipeline in Saudi Arabia. The report, carried by several publications based in Iran, triggered a wave of panic buying in the market.
A string of unscheduled production outages from South Sudan to Syria have reduced global supply, despite Saudi Arabian output running at a 30-year high. That, combined with geopolitical jitters about Iran, has pushed oil prices up 20 per cent since last December. In the US, economists fear rising petrol prices could jeopardise the country’s slow return to economic health.
“There is a need for more production,” Daniel Poneman, the US deputy secretary of energy, said on a visit to Kuwait earlier this week. “Oil prices are not consistent with the global economic recovery,” Mr Poneman added.
The US and the European Union has imposed fresh sanctions on Iran’s oil industry. Brussels has banned Iranian oil imports from July 1 and European-based oil companies have started to sever their links with Tehran.
Iran’s oil production has fallen to a 10-year low and could drop to levels last seen during the Iran-Iraq war in the 1980s as sanctions over its nuclear programme disrupt an industry already suffering from years of under-investment.
The country’s crude production fell by 50,000 barrels a day to 3.38m b/d in February, according to the International Energy Agency. The last time it was that low was in late 2002, IEA statistics show.
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