World oil prices hit their highest levels since November yesterday, before pulling lower, as traders fretted over heightened tensions between key crude producer Iran and the US, analysts said.
The market also won solid support from a stream of positive economic data which boosted the outlook for the global economy and energy demand.
In early morning deals, Brent North Sea crude for delivery next month jumped to US$112.59 per barrel — which was the highest level since Nov. 15. It later stood at US$111.58, down US$0.55 from Tuesday’s closing level.
New York’s West Texas Intermediate (WTI) for delivery next month, spiked to US$103.15, reaching a point last touched in Nov. 17. The contract later changed hands for US$102.30, which was US$0.66 lower than on Tuesday.
Oil had rocketed on Tuesday, underpinned by positive US, Chinese and eurozone economic data, and deepening worries over Iran. The WTI contract leapt by US$4.13 and Brent surged US$4.75 per barrel.
“There has been a little bit of slowing across commodities after the [sharp] rise yesterday, but the situation with Iran remains worrisome,” Nick Trevethan, senior commodities strategist at ANZ Research, said yesterday. “The consequences of any military action in the Middle East will be enormous. A spike in crude prices will kill off any recovery in the US.”
A military confrontation between the US and Iran could see crude oil prices hit the US$200 mark, Trevathan said.
Iran has threatened to choke off shipping or go after US naval ships if Western governments implement the latest round of punitive sanctions over its nuclear program.
Iran’s military on Tuesday warned that it would not allow a US aircraft carrier to return through the Strait of Hormuz — a vital -waterway in the Middle East through which 20 percent of the world’s oil is transported.
Iran’s defense minister added yesterday that his country “will do anything to preserve the security of the Strait of Hormuz” at the entrance to the Gulf.
“The presence of forces from beyond the [Gulf] region has no result but turbulence. We have said the presence of forces from beyond the region in the Persian Gulf is not needed and is harmful,” Iranian Minister of Defense Ahmad Vahidi said, according to the Web site of Iran’s state television.
The US has insisted that it has no plans to pull warships from the region and has dismissed Tehran’s threats as those of a weakened, isolated regime.
“Oil is ... finding support from the continuing tensions between Iran and the United States, as -saber-rattling is stepped up on both sides,” Commerzbank analyst Eugen Weinberg said.
China yesterday criticized hard-hitting new US sanctions on Iran, but said they would not affect its -business dealings there.
“China always believes that sanctioning is not the correct approach to easing tensions and resolving the Iranian nuclear issue. Dialogue and negotiation is the correct way out,” Chinese Foreign Ministry spokesman Hong Lei (洪磊) told a daily news briefing. “China opposes the placing of one’s domestic law above international law and imposing unilateral sanctions on other countries.”
The sanctions targeting Iran’s Central Bank and its ability to sell petroleum abroad have raised concerns that Chinese companies and banks could be penalized over their extensive dealings with Iran.