This was a signal that Crude Oil traders and investors are playing what they have come to learn; the Eurozone continues to avoid making strong decisions regarding its weak economies.
India had signed a contract for 310,000 BPD of Crude Oil from Iran in April, now has canceled 173,000 BPD in July because the privately held Indian refiners cannot get insurance coverage on the cargoe's shipping.
India's state-run refiners have been able to get insurance through the government, which private refiners are now also requesting. India is the 4th largest importer of Crude Oil in the World, and the 2nd-largest Iranian customer.
The flow of Crude Oil out of Iran has been cut by 600,000 BPD from the 2.2-M BPD exported in Y 2011. The government of India has taken some shipments of Crude Oil from Iran and paid in Rupees, which Iran can then spend only in India.
The same is true of some shipments to China, which have been paid for in Yuan, another currency that cannot be easily spent outside its home country.
India is angling for a waiver from US sanctions against Iran and the country has cut its Iranian imports by 11% from last year's levels. If the waiver is granted, the government will be willing to insure some portion Iranian exports to India.
The falling price of Crude Oil is largely the result of falling demand, which is a result of the slowdown in the Global economy. So, the lack of Iran's Crude Oil on the international market should have little impact on Brent Crude's prices.
So, until the World's economy starts to grow at a faster pace, Crude Oil prices are going to see serious downward pressure until the per-barrel price falls below production costs.
Then shutting in some production will likely follow. I have been talking about low Crude Oil prices through the Summer and on into next year for some time now, it is the result of a weak economy, not positive change in the World's demand for Crude Oil.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.