The Energy Report: So Much for the Olive Branch

By: Phil Flynn

Published: Feb 22, 2012

The odds of conflict with Iran continue to rise as it appear talks that could be the last chance to stop events from spinning out of control seem to be dead on arrival. Oil prices which really looked beyond the symbolic Iranian cut of oil to the UK and France, seemed to start to focus a bit more on latest deal to save Greece and a surging stock market. Yet oil already up got another dollar spike when Bloomberg News reported that Iran’s foreign Minister basically said that talks about Iran’s nuclear program were off the table. Many had hoped that the resumption of talks between the International Atomic Energy Agency and Iran was a possible way out of this crisis. Those dreams were seemingly put to rest when a spokesman for the Iranian Foreign Ministry Ramin Mehmanparast, said that when it comes to Iran’s “right to peaceful nuclear energy there is nothing to negotiate.” So much for the olive branch, it seems the tree just fell down.

And if there was a scramble for supply before these comments, there was a spike after. This comes as Iran threatens preemptive strikes against its enemies. Mohammad Hejaz, deputy head of the General Staff of Iranian Armed Forces, warned that Iran could make use of all our means to protect our national interests and hit a retaliatory blow at them whenever we feel that enemies want to endanger our national interests.”

The pressure on Iran is rising as Bloomberg News reports that, "China, the biggest buyer of Iranian crude, cut purchases to the lowest level in five months in January even as its total oil imports rose after trading companies in the two nations failed to renew supply contracts. Imports from Iran fell to 2.08 million metric tons, or about 493,000 barrels a day, according to Bloomberg calculations from data released today by the Beijing-based General Administration of Customs. That’s the lowest rate since August and 14 percent less than the average 575,000 barrels bought daily in December. China’s total crude imports rose 6.8 percent from a month earlier to 5.5 million barrels a day."

Also as Bloomberg reports refiners in Japan are holding off from signing oil-supply contracts from Iran, people with knowledge of the talks said, while China International United Petroleum & Chemical Co. agreed to most terms of a 2012 deal with the Islamic republic, according to three other people. At least three Japanese refiners that buy crude from the Persian Gulf nation haven’t renewed annual contracts with National Iranian Oil Co., pending direction from the government, according to the people, who declined to be identified because the information is confidential. The contracts are for more than 100,000 barrels a day of crude, about a third of Japan’s imports from Iran, according to data supplied by the people.

In other words China and Japan are putting the screws to Iran to buy oil at a discount and why not. If they do not buy it, who will?

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