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US WTI oil price hits choppy trading on Iran tensions and weak markets

US WTI oil futures open Wednesday’s trading session weaker, near $96 a barrel as tensions concerning oil supply disruptions from Iran fueled oil price gains yesterday, however stock markets look set to take the shine off oil prices once again.

Latest WTI Oil Price

US Light crude oil futures for January 2012 delivery was trading at $96.56 a barrel, 07.05 GMT this morning in electronic trading on the NYMEX.

The US crude oil contract closed off Tuesday’s trading session at $98.01, or 0.7 percent higher.

Tensions over Iran

The UK and the US issued new sanctions against Iran on Monday, directly targeting its financial and oil sector in response to what it claims are Iran’s nuclear weapon ambitions.

Iran’s exports of about 2 million barrels a day might be at risk because of an Israeli attack or military skirmish with another country, Citibank analysts led by Edward Morse said in a report today.

Stopping Iranian shipments would probably add $10 to $20 a barrel to the price of oil, Morse said.

There’s a higher risk of a sustained loss of Iranian exports than of a long-term closure of the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. A shutdown of the channel for more than a week is unlikely given American and allied forces in the region, the analysts said.

Stock Markets

Asian stock markets are mostly trading notably lower on Wednesday with investors indulging in some heavy selling, tracking a weak lead from Wall Street where stocks closed lower overnight due to weak GDP data.

Japanese Nikkei Index fell 0.4 percent, while the Hong Kong Hang Seng Index plunges nearly 2.0 percent, the South Korean Kospi Index falls 2.5 percent, and the Australian ASX index sheds another 2.0 percent. In China, the Shangai Composite Index fell 0.9 percent.

Lingering worries about the European economy amid the ongoing debt crisis are also weighing on sentiment to a significant extent.

“What we’re really looking at here is basically a battle between the economic concerns, and the European sovereign debt situation, weighing on psychology and the equity markets, versus tightening sanctions against Iran and the potential for how that effects the petroleum landscape.” said Tom Bentz, director of BNP Paribas Prime Brokerage.

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