Oil hits a six-month high on supply fear

Oil hit a six-month high near $120 a barrel yesterday as concern about supply from Iran, other Middle East producers and Africa outweighed those about the health of the global economy.
By The Newsroom
Published 16th Feb 2012, 09:56 BST

Prices jumped after Iran’s Press TV reported Iran had banned exports to six EU countries in retaliation for European Union sanctions against the Islamic state, only to pare gains after Iran’s Oil Ministry denied the report.

“Bubbling of tensions with Iran will always be supportive of the oil price, and this latest development is no different,” said Harry Tchilinguirian, analyst at BNP Paribas.

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The Iranian news follows other supply issues that were supporting prices earlier yesterday.

An explosion hit a pipeline in Syria yesterday, a strike in Yemen has halted output at its largest oilfield and Sudan seized more of South Sudan’s oil in a dispute over payment issues.

The supply risks far outweigh the effects of the eurozone’s debt problems and will probably keep Brent above $110, said Jeremy Friesen, a commodity strategist at Societe Generale.

“The oil market continues to be caught between a deterioration in the global economy and supply issues, including actual supply disruptions in Sudan,” he said.

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“I don’t think it’s realistic to expect that risks in the Middle East will disappear,” he added.

In a sign that the eurozone may succumb to a mild recession, figures yesterday showed Germany’s economy contracted slightly in the last three months of 2011, while France eked out an anaemic level of growth.

Related topics:IranAfricaSudan