Iran's threat to halt oil shipments through the Strait of Hormuz- Reuters

Published:

28 December 2011 07:30

Updated:

03 January 2012 02:53

(Reuters) - 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 eased 13 cents to $109.14 barrel by 0559 GMT, after climbing more than a dollar in the previous session. Prices have surged over 5 percent since December 16. U.S. crude rose 9 cents to $101.43 a barrel.

Iran's first vice-president warned on Tuesday 27 December 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 Saturday. "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 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 U.S. Energy Information Administration, and U.S. warships patrol the area to ensure safe passage.  Brent eased 13 cents to $109.14 barrel by 0559 GMT, after climbing more than a dollar in the previous session. Prices have surged over 5 percent since December 16. U.S. crude rose 9 cents to $101.43 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 Saturday.

"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 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 U.S. Energy Information Administration, and U.S. warships patrol the area to ensure safe passage.