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 (about R932) a barrel. Traders also said that policy developments in China and hopes that Greece’s second financial package would be agreed on Monday were helping to push up prices. (Eurozone finance ministers agreed a €130-billion package early on Tuesday.)
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 to raise oil prices, including that of 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. Although the move is unlikely to have a large effect on oil refiners in the United Kingdom — 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,” said Ken Hasegawa, a commodity sales manager at Newedge Japan.
The EU has already slapped sanctions on Iran and 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 were creating increased demand.
Investors’ appetite for riskier assets after China’s central bank boosted lending capacity by more than $50-billion, as well as a softer dollar against the euro on expectations that Greece would secure a debt bailout this week, were also supporting oil prices.
Buoyant prices have also pushed shares in BP to their highest level for almost a year. —