Market Review (21st Dec 2011 to 05th Jan 2012)
Crude oil prices traded above $ 103 a barrel in the fortnight, the highest level since early May 2011 as Iran's threat to close the Strait of Hormuz. This is viewed as a major supply disruption from the country. This has helped support oil prices in recent weeks.CME Crude Feb-12 month contract gained by $4.57/BBL to close at $101.81/BBL. 
Tensions between the West and Tehran, which stem from Iran's nuclear program, rose further as new US and European Union financial sanctions began to take a toll on the OPEC member's economy. Iran threatened to cut off oil shipments through the Strait of Hormuz which is located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33 per cent of all ocean-borne traded oil. Meanwhile, prices remained supported amid concerns over a disruption to Iranian oil exports after the Islamic Republic said it will launch missiles and torpedoes as part of an ongoing naval drill in the Strait of Hormuz. Iran is the world's fourth largest oil producer, pumping nearly 5 per cent of the world's oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in the upward direction.
While European Union governments reached a preliminary agreement to ban imports of Iranian crude to the EU, they are yet to decide when the embargo will be put in place. Despite the EU embargo threat, Iran says it is ready to ship its oil to China and other Asian countries as well as Africa. Meanwhile Nigeria government has come out with decision to remove gasoline subsidies at the start of 2012 which has triggered protests and calls for strikes by trade unions. Nigeria has a history of long strikes and that can have an impact on overall crude exports this event also imparted bullishness in crude oil prices.
Crude oil prices rose 8.2 per cent in 2011, the third consecutive annual gain as violence and social unrest spread throughout major oil producing countries in North Africa and the Middle East, sparking fears over a disruption to global supplies. Prices rallied to a 32-month high of $114.80 a barrel in May 2011, before dropping to $ 74.95 in early October as a deepening eurozone debt crisis.
Outlook:
The EU has agreed to ban imports of Iranian oil. The probable sanctions on Iran are due to fear that it is planning to build nuclear bomb. This should help boost oil prices if demand remains unchanged while supply drops. However, it's also reported that Saudi Arabia would increase supply to countries originally importing oil from Iran. In a nutshell, it may force Iran to push oil supply at a discount in the near-term, pressuring oil prices. On the other hand eurozone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
