by Steve Connor
A small British company has produced the first “petrol from air” using a revolutionary technology that promises to solve the energy crisis as well as helping to curb global warming by removing carbon dioxide from the atmosphere.
Air Fuel Synthesis in Stockton-on-Tees has produced five litres of petrol since August when it switched on a small refinery that manufactures gasoline from carbon dioxide and water vapour.
The company hopes that within two years it will build a larger, commercial-scale plant capable of producing a ton of petrol a day. It also plans to produce green aviation fuel to make airline travel more carbon-neutral.
Tim Fox, head of energy and the environment at the Institution of Mechanical Engineers in London, said: “It sounds too good to be true, but it is true. They are doing it and I’ve been up there myself and seen it. The innovation is that they have made it happen as a process. It’s a small pilot plant capturing air and extracting CO2 from it based on well known principles. It uses well-known and well-established components but what is exciting is that they have put the whole thing together and shown that it can work.”
Although the process is still in the early developmental stages and needs to take electricity from the national grid to work, the company believes it will eventually be possible to use power from renewable sources such as wind farms or tidal barrages.
“We’ve taken carbon dioxide from air and hydrogen from water and turned these elements into petrol,” said Peter Harrison, the company’s chief executive, who revealed the breakthrough at a conference at the Institution of Mechanical Engineers in London.
“There’s nobody else doing it in this country or indeed overseas as far as we know. It looks and smells like petrol but it’s a much cleaner and clearer product than petrol derived from fossil oil,” Mr Harrison told The Independent.
“We don’t have any of the additives and nasty bits found in conventional petrol, and yet our fuel can be used in existing engines,” he said.
“It means that people could go on to a garage forecourt and put our product into their car without having to install batteries or adapt the vehicle for fuel cells or having hydrogen tanks fitted. It means that the existing infrastructure for transport can be used,” Mr Harrison said.
Being able to capture carbon dioxide from the air, and effectively remove the principal industrial greenhouse gas resulting from the burning of fossil fuels such as oil and coal, has been the holy grail of the emerging green economy.
Using the extracted carbon dioxide to make petrol that can be stored, transported and used as fuel for existing engines takes the idea one step further. It could transform the environmental and economic landscape of Britain, Mr Harrison explained.
“We are converting renewable electricity into a more versatile, useable and storable form of energy, namely liquid transport fuels. We think that by the end of 2014, provided we can get the funding going, we can be producing petrol using renewable energy and doing it on a commercial basis,” he said.
“We ought to be aiming for a refinery-scale operation within the next 15 years. The issue is making sure the UK is in a good place to be able to set up and establish all the manufacturing processes that this technology requires. You have the potential to change the economics of a country if you can make your own fuel,” he said.
The initial plan is to produce petrol that can be blended with conventional fuel, which would suit the high-performance fuels needed in motor sports. The technology is also ideal for remote communities that have abundant sources of renewable electricity, such solar energy, wind turbines or wave energy, but little in the way of storing it, Mr Harrison said.
“We’re talking to a number of island communities around the world and other niche markets to help solve their energy problems.
“You’re in a market place where the only way is up for the price of fossil oil and at some point there will be a crossover where our fuel becomes cheaper,” he said.
Although the prototype system is designed to extract carbon dioxide from the air, this part of the process is still too inefficient to allow a commercial-scale operation.
The company can and has used carbon dioxide extracted from air to make petrol, but it is also using industrial sources of carbon dioxide until it is able to improve the performance of “carbon capture”.
Other companies are working on ways of improving the technology of carbon capture, which is considered far too costly to be commercially viable as it costs up to £400 for capturing one ton of carbon dioxide.
However, Professor Klaus Lackner of Columbia University in New York said that the high costs of any new technology always fall dramatically.
“I bought my first CD in the 1980s and it cost $20 but now you can make one for less than 10 cents. The cost of a light bulb has fallen 7,000-fold during the past century,” Professor Lackner said.
The company is planting energy grasses to feed a 36 million gallon-a-year cellulosic ethanol plant planned in Florida, he said in an interview in London today. A demonstration biobutanol plant in Hull, England, is operating, New said. A bioethanol plant in the same location should be producing by the end of this year, he said.
Biofuels could account for 9 percent of global transport fuels used by 2030, up from 3 percent now, according to BP. Drivers include climate-change targets in the U.S. and Europe, energy security concerns and the possibility the fuels may be a lucrative crop for ailing rural communities, New said.
“If you believe that demand for transport fuels is going to grow significantly, if you believe that for the foreseeable future we’re going to carry on using internal combustion engines and liquid fuels, then biofuels are going to be the only complement to crude oil that’s out there,” he said.
Cellulosic ethanol uses micro-organisms to break down fibrous plants, making it possible to produce fuel from energy grasses. Unlike sugar cane, which flourishes around the equator, the grasses can be grown anywhere.
Biobutanol is produced by fermenting plant sugars and can be blended with gasoline at higher concentrations. Existing bioethanol can be retrofitted to produce biobutanol, New said. Biobutanol is a type of alcohol that’s used as a fuel.
BP is looking at sites in Texas, Florida and Louisiana where it could farm energy grasses and build new plants, he said. The company is targeting a cost of $60 to $80 a barrel by 2024 from $140 to $150 a barrel today, New said.
The two fuels and a new sugar-to-diesel product will be trialled in 100 vehicles during the London Olympic Games.
- BP Targets Commercial Availability of Two New Biofuels by 2014 – Bloomberg (bloomberg.com)
- New enzymes yield sustainable biofuel (livasperiklis.com)
- Deroy Murdock: High cost of fantasy fuel (junkscience.com)
- Ancient Fungi Could Help Fuel Our Future (izabael.com)
The study will be carried out by Aker Solutions’ newly established engineering office in London, and delivered to the license partners in Q4 2012. The contract value is undisclosed.
“I am very pleased that Det norske has decided to follow on the pre-FEED contract with the award of the topsides FEED contract for the Draupne development. The Draupne pre-FEED was the first contract awarded to the re-established Aker Solutions engineering entity in London. The new award confirms the successful build-up of our London office,” says Valborg Lundegaard, executive vice president and head of engineering in Aker Solutions.
Aker Solutions in 2011 decided to re-enter the London engineering market. Only a few months after opening the new office in Chiswick Park, the company is once again becoming a significant player in the London market. The engineering office now counts 90 employees, and Aker Solutions expects to be around 200 people by the end of 2012.
The Draupne field is located to the west of Stavanger in the North Sea. The partners in the Draupne field have agreed with the partners in the Luno field on a coordinated development solution for the area. Draupne will be developed using a fixed platform with pre-processing, and the well stream will be transported from the Draupne platform to Luno for final processing and export to the markets.
- Aker Solutions to Design World’s Largest Spar Platform for Statoil (mb50.wordpress.com)
- Norway: Aker Solutions Delivers Subsea Templates for Skuld Fast-Track Development (mb50.wordpress.com)
- Ghana: Aker Solutions Signs Well Service Contract with Tullow (mb50.wordpress.com)
- USA: Aker Solutions to Provide Umbilicals for Anadarko’s Lucius Development (mb50.wordpress.com)
- Norway to Power Offshore Platforms from Land? (mb50.wordpress.com)
Trinidad and Tobago’s Ministry of Energy and Energy Affairs (MEEA) has announced that the 2012 Deep Water Competitive Bid Round is tentatively set to open on the 29th of March.
Leading up to the opening of the round, the MEEA will participate in road shows 21st – 24th of February at NAPE 2012 in Houston, 28th – 29th of February at Trinidad and Tobago Energy Trade Mission in the JW Marriot Houston, and the 8th of March at the MEEA delegation to the High Commission for the Republic of Trinidad and Tobago in London where the six selected deep water blocks nominated will be announced.
The six offshore blocks that are to be nominated and offered will come from locations in the East Coast Marine Area and Trinidad and Tobago Deep Atlantic Area (See Concession Map). This acreage offers a mix of water depths, hydrocarbon play-types and production potential.
PGS, in conjunction with the MEEA, has acquired 6,766 km of marine MultiClient 2D data over approximately 43,000 sq. km of the Trinidad and Tobago offshore area.
PGS TOBAGO TROUGH MC2D 2008: 2,448 km of ultra-long offset, dual-sensor GeoStreamer 2D data located across 9 blocks in the West Tobago Sub-basin and Tobago Platform.
PGS DEEPWATER ECMA MC2D 2008: 1,966 km of ultra-long offset, dual-sensor GeoStreamer 2D data located across 26 blocks in the Barbados Accretionary Complex on the Trinidad and Tobago Deep Atlantic Area.
PGS NCMA-4&5 MC2D 2008: 2,352 km of high resolution 2D located across the Patao High across 2 blocks in the West Tobago Sub-basin and Southeast Tobago Sub-basin between the Tobago Platform and the Araya-Tobago metamorphic basement.
- Trinidad expects $3 Bln in energy exploration in 2012 (mb50.wordpress.com)
- Niko Spuds Stalin Well, Offshore Trinidad (mb50.wordpress.com)
Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries‘ second-largest producer.
OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.
Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.
“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”
OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.
Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.
Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.
“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”
Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.
Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.
Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.
U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.
The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.
Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.
More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.
While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.
Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.
Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.
Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.
“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”
–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.
- OSG Says Tanker Pool Will Halt Iran Trade After Sanctions (businessweek.com)
- Another Shipping Bankruptcy Filing Could Signal More on the Way (GMR, ONAVQ, TNK, OSG, NAT, FRO, NM, DRYS) (247wallst.com)
- Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold (jafrianews.com)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
With sanctions currently the U.S. tool of choice for thwarting Iran’s terror networks and nuclear ambitions, the good news is that U.S. lawmakers are crafting new measures to cast a wider net. Let’s hope that this time they don’t leave a hole big enough for an Iranian oil tanker to sail right through.
Make that a fleet of oil tankers. Despite the many sanctions now targeting Iran’s regime, and bedeviling Iran’s national merchant fleet, the Islamic Republic of Iran Shipping Lines (IRISL), Iran’s main tanker fleet has so far remained exempt.
If the aim is to contain and pressure Iran’s regime, this is no small omission. Iran’s main tanker fleet is owned by a company called NITC, formerly the National Iranian Tanker Company. Headquartered in Tehran, NITC ranks as the world’s fourth largest operator of very large crude carriers, according to a leading London-based shipping information service, Lloyd’s List, which reports that last year NITC was responsible for transporting 53 million tons of crude oil.
Currently, NITC’s web site lists a fleet of 39 tankers, which it uses to carry Iranian oil, and also charters out on the international market. NITC serves Iran not only as a vehicle for moving petroleum, but for enjoying business access and networking opportunities. In its chartering activities, NITC says it aims, among other things, to “build close relationships with reputable charters and shipbroking firms,” and call at “a wide variety of global ports and terminals.” NITC describes itself on its web site as employing more than 3,000 staff, including 2,500 seafaring personnel, of whom about 85% are Iranian nationals.
NITC tankers call freely at ports from Europe to the Far East. Within the past five weeks, for instance, an NITC tanker, the Sepid, has called at the Greek port of Piraeus; two more NITC tankers, the Saveh and the Sarvestan, have called at the Dutch port of Rotterdam, where NITC keeps an office.
This week, NITC top management appears to be going through an upheaval. On Tuesday, news broke that NITC’s longtime chairman and managing director, Mohammad Souri, had suddenly stepped down after 26 years at the helm. Reuters reports that he sent out a letter, saying he has retired, but he will continue to serve NITC as an “adviser and supporter.” The new head of NITC will be a former Iranian transportation minister, Hamid Behbahani, who has recently been serving as a transportation adviser to Iran’s President Mahmoud Ahmadinejad.
There is speculation in the shipping press that this shuffle at NITC may be related to the looming possibility of U.S. sanctions on the company. The Senate Banking Committee has been considering whether to include NITC in new sanctions legislation due for a vote this Thursday.
NITC officials have been protesting that it makes no sense for the U.S. to sanction them. They say that while NITC was once owned by Iran’s state oil company, NITC was privatized 12 years ago and is “not a state company,” as NITC’s commercial director, Habibolah Seyedan told Reuters last week. He also said that NITC has no links to Iran’s Islamic Revolutionary Guard Corps, the IRGC. Since the U.S. blacklisted the IRGC in 2007 for its role in Iran’s proliferation activities, both U.S. and European Union sanctions authorities have targeted a growing number of IRGC-related entities linked to Iran’s terror and proliferation networks.
NITC officials have been talking up their professionalism, good safety record, multi-billion dollar investments in their fleet and ties within the global oil and shipping industries. NITC’s newly retired chairman, Mohammad Souri, has for years been racking up international shipping awards. Last December, at a ceremony in Dubai, Lloyd’s List named Souri its Tanker Operator of the Year, for the Middle East and Indian Subcontinent. In 2010, a U.K.-based maritime networking firm, Seatrade, honored Souri in London as its Personality of the Year. After that ceremony, Souri gave an interview to a shipping information service, IHS Fairplay, in which he said, “We are a tanker company, transporting energy for people around the world; we should be thanked, rather than having sanctions.”
Before U.S. lawmakers rush to thank NITC, however, they might want to ask just how many degrees of separation actually distance NITC and its officials from Iran’s regime and the IRGC.
Congressional investigators could start with a closer look at NITC’s ex-chairman, now slated to be its supporter and adviser, Mohammad Souri. Fluent in English, well-traveled and familiar with America and its ways, Souri for more than a quarter of a century has been the human face of NITC. But however great his official distance from the Tehran regime and IRGC, Souri has long occupied a position of trust within the system they have created. In transporting Iran’s oil, NITC plays an important part in the oil supply chain that sustains the Tehran regime and fuels an Iranian economic-political-military complex in which the IRGC plays an increasingly pervasive part.
Educated initially in Iran, Souri then studied in the U.S. in the late 1970s, during the final years of the Shah. While running an international freight company registered in 1976 in New York, he earned a Batchelor’s of Science degree from Howard University, in Washington, D.C., graduating in 1979. That was the year Ayatollah Khomeini took power with Iran’s Islamic revolution. That same year, Souri returned to Iran, and before the year was over he had landed a post as a deputy minister in the new Islamic government’s Ministry of Commerce. Exact dates vary from one version of Souri’s biography to the next, but within a mere three years, he had become chairman and managing director of Iran’s IRISL merchant fleet.
By 1986, the Islamic government had moved Souri to what was arguably an even more important job, as chairman and managing director of NITC, then a subsidiary of the state-owned National Iranian Oil Company (NIOC). That was during the 1984-1988 Iran-Iraq tanker war, in which Iran’s tanker fleet operated in close coordination with both Iran’s regular navy and the IRGC’s parallel navy — which was then developing the kind of speedboat guerrilla tactics Iran uses today to harass U.S. naval ships in the Gulf.
In 2000, Iran’s government “privatized” the NITC, transferring its ownership from the state oil company, NIOC, to a number of Iranian pension funds. Congressional investigators might want to explore the extent to which that arrangement actually qualifies as a private sector deal. In a 2008 confidential U.S. diplomatic cable released last year by WikiLeaks, an American official writing about NITC noted that “67% of the company’s equity is controlled by the Iranian state employee and oil industry employee retirement funds.”
Souri stayed on as head of NITC, resigning a directorship he had held for years on the NIOC board. But under his chairmanship, the NITC board has looked a lot like a NIOC alumni club. Two of the other six directors listed on the NITC web site are former senior officials of NIOC. A third is a former official of the London office of a Tehran-based entity called Kala Naft, which the U.S. government identified in 2010 as wholly owned by NIOC. Last year, when NITC was less shy about its relationship with state-owned NIOC, its web site included a list of its “missions.” Among them were: “Providing marine services to NIOC oil rigs and offshore platforms…Hire of required vessels to International Markets for NIOC…Chartering new vessels on behalf of NIOC affiliated companies.”
NIOC itself, which U.S. lawmakers have also been considering as a sanctions target, is supervised by Iran’s Ministry of Petroleum. Since last summer, the man heading that ministry has been Rostam Qasemi, an IRGC general. Qasemi was blacklisted in 2010 by both the U.S. Treasury and the European Union for serving as head of a huge IRGC business conglomerate, Khatam al-Anbiya.
Then there’s the issue of banking. In an interview last January with Bloomberg news service, NITC’s area manager in the United Arab Emirates, Rahmat Ghareh, mentioned that in the UAE, NITC for its financial transactions was using a branch of Iran’s Bank Saderat. That might be of interest to U.S. lawmakers, because in 2007 the U.S, government blacklisted Bank Saderat “for providing services to terrorist organizations, including Hezbollah.”
If, as reported, former transportation minister Behbahani is now taking the NIOC helm, is this picture likely to improve? Behbahani is a longtime ally of Ahmadinejad, and by some accounts served years ago as Ahmadinejad’s thesis adviser. In 2009, following the Iranian government’s brutal crackdown on demonstrators protesting Ahmadinejad’s rigged reelection, Ahmadinejad appointed Behbahani as transportation minister. On Behbahani’s watch, the transportation ministry awarded a road-building contract worth billions to the IRGC’s Khatam al-Anbiya, the same outfit that has been headed by current oil minister Qasemi.
A year ago, Iran’s parliament impeached Behbahani as transportation minister, amid charges of inefficiency, and following major airplane and train accidents on his watch. Ahmadinejad denounced the impeachment as “illegal,” and made Behbahani his transportation adviser. In that role, Behbahani accompanied Ahmadinejad on a trip this January to see Iran’s pals in Nicaragua, Ecuador, Cuba and Venezuela – an excursion that Rep. Ileana Ros-Lehtinen dubbed a “Tour of Tyrants.”
Is there anything in all this that might warrant sanctions on NITC? Maybe lawmakers can take their pick.
Yukon Pacific is no longer planning to export LNG from the North Slope of Alaska.
Rachael Meredith in London 03 January 2012 11:44 GMT
The US Department of Energy has vacated an earlier order to allow the outfit to export up to 350 million tonnes of LNG for a 25 year term.
Yukon said it is no longer pursuing efforts to export LNG and “is in the process of concluding its business affairs”.
The company first received consent to ship LNG from Alaska in 1989. It had planned to build a gas pipeline parallel to the trans-Alaska oil pipeline, with the option of constructing an LNG facility at Valdez.
- Lithuania: Cheniere Eyes LNG Exports by 2015 (mb50.wordpress.com)
- USA: Sempra to Pursue Tolling Fee for Cameron LNG Export Scheme (mb50.wordpress.com)
- USA: Jordan Cove Files for LNG Export Permit (mb50.wordpress.com)
- ExxonMobil Eyes North American LNG Exports (mb50.wordpress.com)
- Angola LNG Looks to Sell Liquefied Natural Gas to Non-U.S. Buyers (mb50.wordpress.com)
- DOE to halt issuing LNG export licenses (mb50.wordpress.com)
- USA: Cheniere Plans Corpus Christi LNG Export Terminal (mb50.wordpress.com)
Oil surged above $100 a barrel on speculation supplies will be disrupted after a report that Iran will hold drills to close the Strait of Hormuz and that the Federal Reserve may announce additional stimulus measures.
Crude advanced as much as 3.6 percent after the state-run Fars news agency reported the military maneuvers will be “soon,” citing Parvis Sorouri, a member of the parliament’s national security and foreign policy committee. The Strait of Hormuz is a bottleneck for oil exports from the Persian Gulf. The Fed is scheduled to release a statement on monitory policy later today.
“There have been a number of rumors floating around the market today,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “I saw the Iran story yesterday but those headlines seem to have got traction this morning. There are also rumors for further action by the Fed, but where they come from I don’t know. In this electronic world things can jump quickly and trigger stops.”
Crude for January delivery gained $1.91, or 2 percent, to $99.68 a barrel at 11:07 a.m. on the New York Mercantile Exchange. Earlier, futures touched $101.25 a barrel. Prices have risen 9.1 percent this year.
Brent oil for January settlement increased $2.07, or 1.9 percent, to $109.33 a barrel on the London-based ICE Futures Europe exchange.
“There are no headlines to explain this move,” said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. “One has to look at the usual suspects. It was probably a fat-fingered mistake or a margin call.”
Crude pared gains after an Iranian Foreign Ministry spokesman said the Strait of Hormuz isn’t closed. The comments on the strait were made by people who don’t have an official title, said Ramin Mehmanparast, the spokesman.
Sorouri, in comments that first appeared yesterday on the website of the state-run Iranian Students News Agency, said “if the world wants to make the region insecure, we will make the world insecure.”
About 15.5 million barrels of oil a day, about a sixth of global consumption, flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.
“This is the kind of story that sends a shock wave through the market,” said Richard Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
The market also rose on speculation that the Fed will announce a third round of bond purchases in a tactic that has been dubbed quantitative easing. The Fed bought a total of $2.3 trillion in bonds in two rounds of quantitative easing from December 2008 until June 2011.
Fed Chairman Ben S. Bernanke and his policy-making colleagues plan to meet today to discuss the outlook for an economy that has strengthened since their November meeting, lowering the jobless rate to 8.6 percent from 9.1 percent.
- Oil surges on speculation of supply disruption (business.financialpost.com)
- Oil Surge Begins (mb50.wordpress.com)
- Iran Military Practicing Straits Of Hormuz Closure (zerohedge.com)
- Crude shoots up along with stock rally (seattlepi.com)
- Report: Iran To Practice Closing Strait Of Hormuz (jhaines6.wordpress.com)