Forexpros – Crude oil futures rallied to a two-week high on Monday, trading above USD102-a-barrel as growing geopolitical tensions between Iran and the West continued to fuel concerns over a disruption to supplies from the world’s third largest oil exporter.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD102.12 a barrel during early U.S. morning trade, rallying 1.15%.
It earlier rose by as much as 1.45% to trade at USD102.42 a barrel, the highest since November 17.
Tensions over Iran’s nuclear program have been building in recent sessions, helping buoy oil prices. Last week, the U.S., the U.K. and the European Union tightened their sanctions against the Middle Eastern country, following a United Nations report which concluded that the Iranian government was working on a nuclear weapon.
On Sunday, Iran’s state-run IRNA news agency reported that the country’s military shot down an unmanned U.S. spy plane that violated Iranian airspace. The U.S. has not confirmed the report.
Iran’s Foreign Ministry said on Sunday that global oil prices would more than double if the West seriously considered blocking Tehran’s ability to export oil.
“As soon as such an issue is raised seriously the oil price would soar to above USD250 a barrel,” Foreign Ministry spokesman Ramin Mehmanparast said.
U.K. financial service provider Barclays said the situation in Iran “is unlikely to get better any time soon.”
In a report published earlier the lender added that, “Retaliationary efforts from Iran are also feared given its influence over oil trade flows through the Strait of Hormuz.”
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2011 and the second biggest exporter among the Organization of the Petroleum Exporting Countries.
Meanwhile, markets were awaiting the outcome of a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel later in the day to discuss proposals ahead of Friday’s critical European Union summit meeting.
The U.S. dollar weakened against most of its major counterparts, with the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, slumping 0.55% to trade at 78.33.
Dollar-denominated oil futures contracts tend to rise when the dollar falls, as this makes oil cheaper for buyers in other currencies.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery climbed 1.2% to trade at USD111.28 a barrel, with the spread between the Brent and crude contracts standing at USD9.16 a barrel.
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