Oil Prices Rise On EU Oil Embargo

The price of oil in Asian markets rose two days after the EU oil embargo took effect, bringing the price above $84 a barrel.

The Associated Press reports that oil prices had plunged to $77 last week from $106 two months ago, based on predictions that slow economic growth in the U.S., Europe and China would reduce demand for oil.

While Goldman Sachs has reported that, so far, the expected collapse in the demand for oil has not materialized, it added that traders are closely monitoring the effect of the EU oil embargo against Iran.

The Goldman Sachs report says: “U.S. and EU sanctions against Iran are now in effect, and look to have a greater impact than we had anticipated. The loss in Iranian exports could soon rival the loss of Libyan crude oil supplies last year.”

EU sanctions on oil exports took effect on July 1, prohibiting all EU member states from buying Iranian crude or providing insurance for Iranian oil shipments.

Iranian Parliament is drawing up plans for a possible blockade of the Strait of Hormuz, which sees the passage of one-fifth of the world’s oil exports on a daily basis. Parliament says it is considering blocking the delivery of oil to countries that have put sanctions on Iranian oil.

The Iranian Foreign Ministry has announced that it will be bound by any legislation passed by Parliament but it added that Iran is committed to the security of the Persian Gulf.

Meanwhile, the United States has reportedly increased its military presence in the Persian Gulf in response to the possible blockade.