Singapore - Brent crude futures rose above $116 to a six-month high on Tuesday as fresh threats from Iran to ban exports to some European states stoked supply concerns, overshadowing fears that Greece’s debt crisis was worsening.
Brent’s premium to US oil stayed around $19 a barrel, near its highest since November, as a severe cold wave spread across Europe and as simmering tensions between the West and Iran escalated. But Greece’s wrangling over a bailout fund helped cap those gains.
Front-month Brent increased 25 cents to $116.18 a barrel, gaining for a sixth straight day. The benchmark earlier touched $116.70, its highest since early August. US oil added 27 cents to $97.18, recouping some of the last session’s losses.
“The geopolitical events surrounding Iran and the Middle East and the severe cold weather sweeping across Europe are providing support for Brent,” said Victor Shum, senior partner at oil consultancy Purvin & Gertz.
“We continue to see more upside risks for oil, but Europe’s debt crisis will weigh.”
Supply worries and Europe’s cold weather offset a firmer dollar index. A stronger greenback typically weighs on oil as it pressures dollar-denominated commodities by making them more expensive for consumers using other currencies.
Brent is expected to keep trading around $116, while US. crude may inch up towards $100 as the difference between the two benchmarks narrows, Shum said.
Iran’s parliament said on Tuesday it was ready to impose a ban on oil exports to some European states, the country’s English-language Press TV reported, pre-empting a ban announced by the Union slated to begin from July 1.
President Barack Obama tightened sanctions on Iran another notch, the White House said on Monday, targeting its central bank and giving US banks new powers to freeze assets linked to the government.
Iran responded to the announcement by calling the decision an “antagonistic move”.
The escalating violence in Syria is adding to concerns over the stability of the Middle East. Heavy bombardment of the Syrian city of Homs resumed on Tuesday after at least 95 civilians were killed on Monday in an offensive to put down a popular revolt against President Bashar al-Assad’s rule.
Clashes in Nigeria are also worrying investors about possible supply disruptions from Africa’s top oil producer after a pipeline belonging to Italy’s Eni was blown up.
A bullish target at $118.65 per barrel has been established for Brent as it is riding on a powerful wave “C” or wave (3), while US oil still targets $98.61 per barrel, as a rebound from the February 2 low of $95.44 will continue, according to Reuters technical analyst Wang Tao.
GreeceGreece’s resistance to a set of strict conditions attached to a bailout fund sapped the recent strength in Asian shares on Tuesday. Most other risky assets also paused as investors watched if the restructuring talks would be resolved.
Failure to strike a deal to secure the rescue fund risks pushing Athens into a chaotic debt default and threatens to trigger contagion across the whole region.
“International risk markets were largely in a holding pattern last night pending insight into whether Greece will meet the conditions to avoid a disorderly default,” Ric Spooner, chief market analyst at CMC Markets, said in a report.
US oil prices could also come under pressure due to expectations that stockpiles in the world’s largest oil consumer rose last week for the third straight time on higher imports and lower refinery runs.
On average, analysts projected domestic crude inventories would rise by 2.6 million barrels in the week to February 3. Industry group the American Petroleum Institute is slated to issue the stocks data later in the day.