West Texas Intermediate (WTI) light sweet crude oil for March delivery was falling 44 cents to $99.12 a barrel, while the March European Brent crude contract was down 9 cents to $111.37. This, as the U.S. dollar index added 0.6% to $79.28.
General investor sentiment was taking a hit from the lack of an absolute guarantee on a second bailout package for Greece from the International Monetary Fund and European partners to protect the country from a disastrous default on its debt. While a debt swap deal between Greece and its private investors, on which the second bailout depends, is in a progress, a final agreement hasn't yet been reached. Meanwhile, a European Union summit is taking place today in Brussels for a sign off on a permanent rescue fund for the euro zone.
A read on the fundamentals are also pushing oil prices in a bearish direction, as Iran decided over the weekend to hold off on the vote for a complete and immediate ban of oil exports to European countries -- a response to the vote by European leaders to implement sanctions on the country's crude imports.
Iran's delay has reduced the risk of any pressing oil supply shortages, putting pressure on oil prices. "Given its dependency on oil revenues, it is in any case doubtful that Iran will take this step," says Carsten Fritsch, an analyst at Commerzbank Commodity Research. Whereas the sanction of Iranian oil by European countries wouldn't be pain free, as they would have to go through the trouble of finding new suppliers offering favorable crude prices, an outright ban by Iran of its exports, likewise, would require the country to scramble for new buyers willing to pay for the goods at existing price levels. Still, if Iran were to decide in favor of a complete export ban, there would still be an extra cushion for world supply, thanks to a ramp up by Libya of its oil output to 80% of the pre-war level. Commerzbank research shows that while money managers increased their net long positions in WTI by 11,200 contracts to a ten-week high of 175,377 contracts in the week to Jan. 24, given the European oil embargo, the WTI price hasn't benefited from the moves.
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