Oil price climbs on fear Iran may stop more oil

NEW YORK—Oil prices on Tuesday climbed to the highest level since May on concerns about Europe’s oil supplies. Iran announced over the weekend that it will stop selling oil to Britain and France in retaliation for a planned European oil embargo this summer. The move was mainly symbolic — Britain and France import almost no oil from Iran — but it raised concerns that Iran could take the same hard line with other European nations that use more Iranian crude.

The European Union buys about 18 per cent of Iran’s oil exports, though most of that comes from sales to just two countries: Italy and Spain. Benchmark crude rose by US$1.60 to US$105.20 per barrel in New York. That’s the highest price for oil since May 11. Brent crude, which is used to price foreign oil varieties imported by US refineries, rose by 55 cents to US$120.60 in London.

“People are just scared about Iran,” independent analyst and trader Stephen Schork said. “It was a big head fake, but crude prices are still ripping” higher. The announcement by Iran follows a several-month standoff with the US and Europe over Iran’s nuclear programme. Western nations fear Iran is building a nuclear weapon and have been trying to put financial pressure on the country to abandon its nuclear program.

The European Union has frozen assets of Iran’s central bank, and it plans to stop buying Iranian oil after July. If Iran stops selling oil to some European countries ahead of the embargo, refineries will have to find alternative sources of oil sooner than planned. A scramble for alternate oil sources would temporarily boost oil demand and prices, analysts said. “We have every reason to expect to see prices advance on this latest Iranian news,” Cameron Hanover analyst Peter Beutel said.

On Tuesday, oil prices also were supported by Europe’s approval of a US$170 billion lifeline to Greece. The decision, which includes an agreement by Greece to cut spending, raised hopes that Europe will contain a banking crisis that has hurt its economy and weakened energy demand.

AP