Oil declines from six-week high

Oil declined from a six-week high as concerns eased that Iran will block the Strait of Hormuz, a corridor linking the Persian Gulf with international ports.

Futures lost as much as 0.7 percent after rising yesterday for a sixth day, the longest run of advances since November 2010. Iran’s official Islamic Republic News Agency cited Vice President Mohammad Reza Rahimi as saying the country would bar shipments through the strait if sanctions are imposed on its oil exports. Iran is attempting to “distract attention” from its nuclear program with its threat, Mark Toner, a State Department spokesman, said at a briefing yesterday in Washington.

About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground- to-sea missile systems and torpedoes, Press TV said Dec. 24.

More than 75 percent of crude shipments that pass through the strait are destined for markets in Asia, particularly China, Japan, India and South Korea, according to the U.S. Energy Department. Iran can block the Strait of Hormuz if necessary, Press TV said today, citing Navy Commander Habibollah Sayyari.

U.S. oil inventories probably fell a third week, according to a Bloomberg News survey before tomorrow’s Energy Department report.

U.S. crude stockpiles shrank by 2.5 million barrels, or 0.8 percent, to 321.1 million last week, according to the median estimate of seven analysts polled before an Energy Department report tomorrow. That would be the lowest level since the period ended Dec. 26, 2008. Six respondents forecast a decline and one an increase.

Oil inventories fell in December in the past five years as refiners reduced stockpiles at the year end to minimize their taxes. Texas and Louisiana assess taxes based on the fair-market value of inventories on Jan. 1.

The Energy Department is scheduled to release its weekly report at 11 a.m. on Dec. 29 in Washington, a day later than usual because of the Christmas holidays.

Oil for February delivery was at $100.91 a barrel, down 43 cents, in electronic trading on the New York Mercantile Exchange at 1:09 p.m. London time. It added 1.7 percent to $101.34 a barrel yesterday, the highest settlement since Nov. 16. Futures climbed 11 percent this year, extending last year’s advance of 15 percent.

Brent oil for February settlement was down 81 cents, or 0.7 percent, at $108.46 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to crude in New York was $7.52 a barrel, compared with $7.93 at yesterday’s close, the smallest differential based on settlement prices since Jan. 20.