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Wednesday, 8 February 2012 01:22 - - {{hitsCtrl.values.hits}}
LONDON (Reuters): Brent crude oil rose above $ 116 per barrel to a six-month high on Tuesday as threats from Iran to ban exports to some European states stoked supply concerns, overshadowing fears that Greece’s debt crisis was worsening and could curb economic growth.
Brent’s premium to US crude oil widened to more than $ 20 per barrel, its highest since October, as severe wintry weather spread across Europe and simmering tensions between the West and Iran escalated.
Front-month Brent touched $ 116.70, up 77 cents and its highest since early August, before easing back to trade around $ 115.93 a barrel by 1230 GMT, unchanged on the day.
“The geopolitical events surrounding Iran and the Middle East and the severe cold weather sweeping across Europe are providing support for Brent,” said Victor Shum, senior partner at oil consultancy Purvin & Gertz. “We continue to see more upside risks for oil, but Europe’s debt crisis will weigh.”
US crude came under pressure from ample domestic supply and rising US oil inventories. US oil fell more than $1 per barrel at one point before recovering slightly to trade around $ 95.95, down 96 cents, by 1230 GMT.
Iran’s Parliament said on Tuesday it was ready to impose a ban on oil exports to some European states, the country’s English-language Press TV reported, pre-empting a ban announced by the Union slated to begin from 1 July.
President Barack Obama tightened sanctions on Iran another notch, the White House said on Monday, targeting its Central Bank and giving US banks new powers to freeze assets linked to the Government.
Iran responded to the announcement by calling the decision an “antagonistic move”.
Analysts said the widening premium for Brent over its US counterpart was largely due to supply fears and the spread could widen in the short term.
“Without Iran and other worries over supply, Brent would be more likely to follow US crude,” said Carsten Fritsch commodities analyst at Commerzbank in Frankfurt. “Perhaps $ 6 to $ 8 of the Brent premium is attributable to supply risks.”
Clashes in Nigeria are also worrying investors about possible supply disruptions after a pipeline belonging to Italy’s Eni was blown up.
Escalating violence in Syria is adding to concerns over the stability of the Middle East. Heavy bombardment of the Syrian city of Homs resumed on Tuesday after at least 95 civilians were killed on Monday in an offensive to put down a popular revolt against President Bashar al-Assad’s rule.
But Greece’s wrangling over a bailout fund helped cap gains. Greece’s resistance to a set of strict conditions attached to a bailout fund helped weaken stock markets and limit Brent’s gains on Tuesday, traders said. Most other risky assets also paused as investors watched if the restructuring talks would be resolved.
US oil prices could also come under pressure due to expectations that stockpiles in the world’s largest oil consumer rose last week for the third straight time on higher imports and lower refinery runs.
On average, analysts projected domestic crude inventories would rise by 2.6 million barrels in the week to 3 February. Industry group the American Petroleum Institute is slated to issue the stocks data later in the day.
