Oil prices rose again on Thursday, pushed up by concerns over disruptions to supplies from Iran.
As well as imminent western sanctions against Tehran because of its nuclear programme, the country’s efforts to export crude will be complicated by news that a major Chinese ship insurer is no longer going to provide cover for tankers carrying Iranian oil.
Brent crude is up by more than 12 percent since the start of the year and analysts worry that this will hit economic growth.
Simon Wardell, Senior Oil Analyst with IHS Global Insight, said prices must fall to avoid such an impact: “The global economy is still recovering and these sorts of prices knock that back a bit, so certainly we should see prices lower.”
With a European Union embargo on Iranian oil coming into force at the start of July, and Japanese refiners reportedly planning to cut crude imports from Iran, Tehran will be even more dependent on buyers like China – its top customer – which is why the tanker insurance move is so significant.
Reuters is reporting that sources at insurer China P&I Club have said that the company does not want to stand alone in the market, especially after insurers in Japan and Europe plan to either limit or ban their own coverage for tankers operating in Iran.
The China P&I Club, whose members include major Chinese shipping firms Sinotrans and COSCO Group, is the first Chinese maritime insurer to confirm it will halt business with tankers operating in Iran.
“Many ship owners want to join our club and want our club to cover this risk, but considering all these regulations from the United States and the EU, I know the China P&I club will not do that,” said a Hong Kong-based official with the insurer, which provides coverage to more than 1,000 vessels.
“The China P&I club will not take the risk. We have asked our members not to go there, if they go there, they take their own risk,” the official added, who wished not to be named because he was not authorised to speak to the media.
Iran’s other major buyers — India, Japan and South Korea — are running into similar problems, raising questions on how Tehran will be able to continue to export the bulk of its oil.
Iran sells most of its 2.2 million barrels per day of oil exports in Asia, where China, India, Japan and South Korea are the four biggest buyers.
Chinese imports from Iran are already down more than 21 percent in the first two months of 2012 to around 395,000 barrels per day compared to the same period last year.