Forexpros – Crude oil futures retreated on Wednesday, easing off a nine-month following the release of downbeat euro zone manufacturing data, but growing tensions between Iran and the West continued to support prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in April traded at USD105.85 a barrel during European morning trade, shedding 0.38%.
On Tuesday, prices rose to USD106.46 a barrel, the highest since May of last year.
Crude prices came under selling pressure after data showed that manufacturing activity in Germany slowed to the lowest level in two months in February, declining by 0.9 points to 50.1 and confounding expectations for a gain to 51.5.
A separate report showed that manufacturing activity in the euro zone remained in contraction territory for the seventh consecutive month in February.
A preliminary estimate of HSBC’s China manufacturing Purchasing Managers’ Index, which showed an improvement from January but remained in contractionary territory for the fourth consecutive month also weighed.
The euro zone accounted for nearly 16% of global oil consumption in 2010, according to data from British Petroleum, while China is the world’s second largest oil-consuming nation.
Manufacturing numbers are used as indicators for fuel demand growth.
Meanwhile, markets were jittery amid uncertainty over Greece’s ability to implement the terms of a EUR130 billion bailout package approved by euro zone finance ministers early Tuesday morning.
But prices remained supported amid growing tension between Iran and the West. The International Atomic Energy Agency said Iran refused permission to visit the Parchin military base during two days of talks that ended Tuesday.
Also Tuesday, the head of Iran’s state oil company said that if other European nations continued “hostile acts” it would stop exporting oil to them as well, after halting crude shipments to French and British companies over the weekend.
The pre-emptive sales embargo by Iran comes in response to tighter sanctions on the country after European Union states agreed in late January to stop importing Iranian crude from July 1.
Growing tensions between Iran and Israel also remain in focus. Iran’s military started a four-day air defense exercise in a 190,000 square kilometer area in southern Iran to protect nuclear sites threatened by possible Israeli attacks.
The risk of a military conflict in a region was further underscored when an Iranian general said his nation would consider pre-emptive action if it is threatened.
There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
Iran is the world’s third largest oil exporter, after Saudi Arabia and Russia. The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for April delivery slumped 0.4% to trade at USD121.16 a barrel, with the spread between the Brent and crude contracts standing at USD15.31.
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