Oil Report

No big oil price fall despite easing tensions -Iran

TEHRAN, Jan 16 (Reuters) - An Iranian oil official said he did not expect a big fall in oil prices because OPEC states and other producers had less spare capacity and speculation was also keeping prices high, a newspaper reported on Wednesday.

Iran’s OPEC governor, Hossein Kazempour Ardebili, told a local newspaper an easing of tensions over Tehran’s nuclear row with the West would ease upward pressure on prices but this would not be enough to bring them down sharply.

“What has the most impact on the price is paper markets not physical (markets). In other words, the current price is the product of speculation... ,” Kazempour Ardebili said.

Iran, the second-biggest producer in the Organization of the Petroleum Exporting Countries, has frequently said oil markets were not short of crude supply.

“A decrease in the gap between production and capacity and eventual decrease in the extra capacity in the main producing countries, especially OPEC, ... has led to an increase of demand and price,” he said.

Traders have cited Iran’s nuclear row with the West as a factor supporting oil price rises and helping them to record levels. Oil hit a lifetime high of $100.09 a barrel this year.

But analysts say the threat of U.S. military action against Iran has eased since a U.S. intelligence report in December said Tehran had halted a programmme to build nuclear weapons in 2003. Iran denies ever having had any such designs.

“I have to say that the easing of Iran’s nuclear issue, compared to last year, can be (a factor) for the market to be calm,” he said.

But when asked if expected a big drop in prices as a result, he said: “No, we have passed the time for low oil prices.”

He said rising costs of investment in expanding capacity were supporting oil prices.

“... the current situation shows the slow continuation of a rise in prices but how long this will last is unclear,” he said. (Reporting by Zahra Hosseinian, Writing by Edmund Blair; Editing by Ramthan Hussain)