Crude oil futures were on the rise on Wednesday and one investment house projects the value of the energy commodity to skyrocket even higher as a result of bans on imports from oil-rich Iran, according to published reports.
Reuters reports the energy commodity touched its top value in seven weeks on Wednesday amid concerns about the European Union banning oil sales from Iran. Officials in the European Union said they already have agreed on a tentative accord to ban shipments of crude from Iran though they have not yet concluded when the sanction will be initiated.
Consequently, crude prices gained in value on Wednesday. But some analysts said the increase in value might have been overdone.
"There's an anticipation that it might lead to an escalation of military activity in the region, but we think this is overplayed," energy strategist Gareth Lewis-Davies with BNP Paribas told Reuters. "You have to look at whether it has an immediate impact on purchases and it seems it does not. Also most Iranian oil is purchased outside the EU and United States, with India and China big buyers."
At 1:49 p.m. on Wednesday, crude oil futures increased 1.18 percent, a $1.32 gain to $113.45 per barrel.
Voice of America reports the price of oil gained four percent in value on Tuesday amid the increasing tensions regarding Iran's nuclear aspirations. The Middle Eastern nation threatened to resist military efforts of a U.S. warship if that vessel returned to international waters near Iran. The Strait of Hormuz, located north of the United Arab Emirates and south of Iran, sees the daily passage of millions of barrels of oil.
The standoff between Iran and its critics is escalating preoccupations about the supply of the energy commodity.
The price of oil also gained as a result of uplifting reports about U.S. manufacturing, which suggests economic growth is afoot. That would prompt rising demand for energy.
Bloomberg reports Societe Generale forecasts crude oil might push as high as $125 per barrel amid the EU's sanctions of the energy commodity coming from Iran.
Mike Wittner, head of oil market research, told the news service that Saudi Arabia would step forward to produce a replacement supply of roughly 600,000 barrels per day. That, in turn, would reduce Saudi Arabia's spare capacity.
The nations of the EU neared the cancellation of buying oil from Iran, which was motivated by the nuclear program on the Middle Eastern nation.
"The EU imports 600,000 barrels a day from Iran, that will go to zero sooner or later," Wittner told the news service. "Does Saudi have the ability to replace it? Yes. But then the market may become concerned about how much spare capacity Saudi Arabia has remaining."
The energy commodity was displaying parallels with equity markets that were driving lower in value amid worries about the debt scourge.
"People took their eye off of Europe yesterday because of the weekend's missile firing and rhetoric, but I think the rhetoric was more motivated by stemming off sanctions than any real threat of military action," president Ray Carbone with Paramount Options told The Journal. "I think it was overdone."
The sovereign debt crisis' damages fell to the backdrop while concerns for Iran manifested. But on Wednesday, worries about the euro debt scourge reared anew.
"Would you believe, the full head of steam built up by yesterday's positive sentiment has seen its pressure released by … European economic concerns," states a Tuesday note penned by Matt Smith of Summit Energy, The Journal reports.
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