Oil traded near $100 a barrel in New York amid concern Iran will respond to a European embargo on its crude exports by shutting the Strait of Hormuz.
Futures rose as much as 0.6 percent, extending yesterday’s 1.3 percent gain. EU foreign ministers agreed to ban Iranian supplies starting July 1 to pressure the country over its nuclear program. The Persian Gulf nation has threatened to close the Strait of Hormuz in response.
“The market is taking its breath to see what will happen next with Iran,” said David Lennox, an analyst at Fat Prophets in Sydney. “You would have thought with the embargo coming out of the euro zone that the oil price would have been somewhere around $115 but it hasn’t happened.”
Crude for March delivery rose as much as 60 cents to $100.18 a barrel and was at $99.93 at 8:22 a.m. London time. The front-month contract settled at 99.58 yesterday, the highest since Jan. 19. Brent oil for March settlement was at $110.87 a barrel, up 29 cents, on the London-based ICE Futures Europeexchange. The European benchmark contract’s premium to West Texas Intermediate was at $11.06 today, compared with a record $27.88 on Oct. 14.
The EU will freeze the assets in Europe of the Iranian central bank as well as eight other entities and ban the trade in gold, precious metals, diamonds and petrochemical products from Iran, the 27-nation bloc said in a statement yesterday. Europe is the second-biggest buyer of Iran’s oil after China.
The Strait of Hormuz is a transit route for about a fifth of the world’s crude, according to the U.S. Department of Energy. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Qatar and Kuwait ship crude and liquefied natural gas through the channel. Iran will close the waterway if sanctions impede the sale of its oil, state-run Fars news agency said yesterday, citing Mohammad Kowsari, deputy head of the parliament’s National Security and Foreign Policy commission.
The ban on imports was a “hasty decision” that will drive up prices and threaten economic growth in Western countries, the Iranian oil ministry said in a statement published on the website of the state-run Fars news agency yesterday.