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Washington: A US intelligence report showing that Tehran halted its atomic weapons programme four years ago reduces the chance of a US military confrontation with Iran and could erode the geopolitical risk premium on crude oil prices, analysts said on Tuesday.
The US National Intelligence Estimate (NIE) took US friends and foes by surprise after years of strident rhetoric from Washington accusing the Opec member of pursuing a covert nuclear weapons programme.
US Energy Secretary Sam Bodman dismissed the chance of the report affecting oil markets. Still, US crude oil prices fell nearly $2 to below $88 a barrel on Tuesday after the report was released, as traders saw a slimmer chance of a disruption from the world's No. 4 oil exporter.
"There has been a certain fear of a preemptive strike against Iran, and I think the most direct consequence of the [intelligence report] is that the risk - although not very high - of that has fallen away for the foreseeable future." said Samuel Ciszuk, Middle East energy analyst at Global Insight.
Analysts declined to put an exact dollar amount on the "fear premium" in oil prices to account for potential supply disruptions in major producers like Venezuela, Nigeria and Iraq.
Some said such concerns were still adding about $10 a barrel to the oil price.
Record rally
Tensions between Tehran and Washington helped fuel the record rally that sent prices up 40 per cent to just shy of $100 a barrel from August to late November amid concerns of a supply shortfall ahead of the Northern Hemisphere winter.
But experts said the intelligence report will make it harder for the United States to make a case for action by the United Nations Security Council, or to justify a unilateral military strike.
"It will make it harder to push for tougher sanctions on Iran, but most importantly it should seriously dent market fear of a US unilateral strike on Iran," said Olivier Jakob at oil consultancy Petromatrix.
"In terms of getting an agreement on toughening up sanctions or taking military action, this lowers the risk," said David Pumph-rey, a senior fellow at the Centre for Strategic and International Studies, a Washington think tank. "If anything it serves to remove that geopolitical uncertainty."
"For oil prices, it's quite dramatic and certainly important," said James Placke, an analyst with Cambridge Energy Research Associates, the oil consultancy.
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