NEW YORK: Brent crude oil rose to an eight-month high above $121 a barrel on Tuesday as Iran repeated its threat of a pre-emptive strike against those it considered enemies and as investors were relieved that Greece has secured a second debt bailout.
Geopolitical risks kept oil prices elevated. Iran's top customers in Asia moved to cut back on supplies due to tighter sanctions by the west. Asian cuts are in addition to voluntary cutbacks by Iran's clients in Europe ahead of a July 1 European Union ban on Tehran's oil.
US crude futures shot up to a nine-month high, rising for a third straight day, on the news from Iran and Greece and still supported by last week's series of upbeat US economic data.
In London, Brent crude for April delivery was up $1.32 at $121.37 a barrel after hitting a session high of $121.42, the highest intraday price since June 15, when prices peaked at $121.47.
"The Greece debt deal is sort of anti-climactic, with enthusiasm already having built up before it was sealed. But the feeling is that this is a short-term solution and though supportive to the market, it does not preclude Greece getting back into debt problems again," said Phil Flynn, analyst at PFGBest Research in Chicago.
As Iran continues to raise concerns, there is a potential
for conflict to develop that affects oil supply, "and on that score, investors are reluctant to be caught short," Flynn added.
US March crude, which expires at the close of floor trading on Tuesday, was up $2.76 at $106, having climbed earlier to a session high of $106.07, the highest intraday since May 5' $109.38.
April Brent's premium against its counterpart US April crude stood at around $15.15, after narrowing to $14.25 early. It closed at $15.98 on Friday, down sharply from Thursday's $17.47. close.
The spread is narrowing amid news that Enterprise Products has begun purging the Seaway pipeline ahead of a reversal that will move crude out of the glutted Midwest and into the US Gulf Coast refining, a development seen likely to bring US crude futures closer in line with world prices.
The reversal is planned to take place in stages, with an initial 150,000 barrels-per-day flowing from Cushing, Oklahoma, the delivery point for US-traded oil futures, to refineries in the Houston, Texas, area by June 1, according to a schedule released by Enterprise.
"The market has been looking for any news that would point to easing the oil glut in the Midwest. The news today moves in that direction and that's causing the Brent premium to narrow," said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.
Euro zone financial ministers agreed to a 130-billion-euro ($172 billion) rescue for Greece to avert a chaotic default after forcing Athens to commit unpopular austerity measures and private bondholders to take bigger losses on Greek bonds.
Iran would take pre-emptive action against its enemies if it felt is national interests were endangered, the deputy head of the Islamic Republic's armed forces was quoted by the semi-official news agency Fars as saying.
China, India and Japan are planning cuts of at least 10 percent in Iranian crude imports as tightening US sanctions make it difficult for the top Asian buyers to keep doing business with the OPEC producer.
On Sunday, Iran announced a retaliatory halt in oil sales to French and British companies, a largely symbolic step as exports to the two countries were already greatly reduced.
"Sabre-rattling on the part of Iran is continuing to lend support to the price ... which 'punishes' all EU countries for their boycott decision," said Carsten Fritsch of Commerzbank. The euro oil price is just below its mid-2008 record high, he said.
Iran kept up the pressure on Tuesday, saying it might stop exporting to European countries that have not clarified their position on oil imports.
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