TENSIONS between Iran and the West continued to weigh on energy markets as oil rose to the highest level in five weeks yesterday.
Benchmark West Texas Intermediate crude rose 45 cents to US$102.24 in New York, while Brent crude, which is used to price foreign oil imported by US refineries, rose US$1.08 to US$120.01 in London.
The price of WTI has risen about more than 3 percent since the start of the year. The increase in Brent has been even steeper, up nearly 12 percent.
Iran has been the center of attention in the Middle East - and the oil market - since November. It has threatened to cut off oil supplies to Europe to retaliate for an embargo that the EU plans to implement this summer.
The US and Europe are using sanctions to pressure Iran to abandon its nuclear program, which they fear will be used to develop a bomb. Iran denies the claim. The European Union buys about 18 percent of Iran's total crude exports.
Iran relies on oil exports for about half of its revenue. Iran state media reported Wednesday that Iran would halt exports to six European countries. Iran's Foreign Ministry later denies that.
Analysts think Iran would hurt itself by stopping crude shipments.
"Given Iran's dependence on its oil revenues and the latest reports of its payment difficulties, an immediate ban on shipments is not overly credible," said a report from analysts at Commerzbank in Frankfurt. "At current prices, a ban on oil shipments would thus cost Iran around US$70 million in daily oil revenues if no other buyers could be found."
The weather in Europe is keeping oil prices high as well, especially for Brent. A severe cold snap is pushing up demand for energy. The rise in Brent in turn contributes to high gasoline prices in the US, since many refineries use Brent to make gasoline.
Also yesterday there were more signs that the US economy is recovering. The Labor Department said weekly applications for jobless benefits fell for the fourth time in five weeks to the lowest point since March 2008. While lower unemployment may be good news, it's also likely to increase demand for oil and push up prices.
Oil prices spiked at this time last year with uprisings in several Middle East nations, particularly Libya. Investors who worried about major disruptions in supplies bought oil and drove up the price. WTI is up 21 percent from a year ago, when it sold for around US$85 a barrel. Brent is up about 15 percent.
In other energy trading yesterday, heating oil rose almost a penny to US$3.20 per gallon and gasoline futures rose 4 cents to US$3.04 per gallon.
Natural gas rose 15 cents, or 6 percent, to US$2.57 per 1,000 cubic feet after the Energy Department reported the nation's gas supplies fell more than analysts expected last week.
At the pump, the national average for gasoline was unchanged at US$3.52 a gallon.