Brent crude at $121.15 a barrel following news of Iran’s oil export ban to UK and French companies
Brent crude hit its highest point in eight months on Monday as Iran halted exports to British and French companies ahead of a European Union embargo.
Oil prices edged above $121 a barrel. Traders also said that policy developments in China and hopes that Greece’s second financial package will be agreed on Monday were helping to push up prices.
Over the past month fears of supply disruption in Iran and upbeat economic data from the world’s largest oil user, the United States, have helped raise oil prices including Brent, which is sourced from the North Sea. The combination of factors driving demand took the price to $121.15 a barrel during Monday morning trading, a level not seen since mid-June last year.
Opec’s second largest producer, Iran, stopped oil sales to British and French companies on Sunday, retaliating against tightening EU sanctions imposed over its disputed nuclear programme. European oil buyers had already made big cuts in purchases from Iran in recent months ahead of sanctions.
While the move is unlikely to have a large effect on UK oil refiners – they source less than 1% of their oil from Iran – it remains emotive in oil markets. “This is supply related so it had a psychological impact,” Ken Hasegawa, a Tokyo-based commodity sales manager at Newedge Japan, told Reuters.
The EU has already slapped sanctions on Iran and has vowed to stop buying all Iranian oil by July. Iran was supplying more than 700,000 barrels a day to the EU last year but this had already been cut back by 300,000 before Sunday’s move, according to industry website liveoilprices.co.uk. BP is among a number of major companies that have already stopped importing oil from Iran, triggering speculation that Sunday’s announcement was merely political posturing.
Meanwhile, analysts at investment bank JP Morgan Chase have raised their 2012 price forecast for Brent crude by $6 to $118 a barrel because of supply risks and rising economic growth. It also hiked its forecast for 2013 to $125 a barrel, up from $121, arguing that geopolitical issues are creating increased demand for crude.
Investors’ appetite for riskier assets after China’s central bank boosted lending capacity by more than $50bn (£32bn), as well as a softer dollar against the euro on expectations Greece would secure a debt bailout this week, are also supporting oil prices.
Buoyant prices have also pushed shares in BP to their highest level for almost a year.
from Simon Goodley