Oil near month-high of $102 a barrel

Oil jumped to $102 a barrel on Wednesday after Iran announced it would stop crude exports to six European countries and investors were heartened from positive developments in Europe's sovereign debt crisis.

By early afternoon in Europe, benchmark crude was up $1.11 to $101.85 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 17 cents to finish at $100.74 per barrel in New York on Tuesday.

At the end of trade, Benchmark US crude was up $1.06 at $101.80 per barrel in New York.

In London, Brent crude finished $1.58 higher at $118.93 per barrel on the ICE Futures exchange.

Iranian state TV said on Wednesday that the country had cut oil exports to six European countries in response to sanctions from the European Union which include a boycott of new oil contracts with Iran. No further details were immediately available.

Iran’s oil minister Rostam Qassemi said recently that Tehran could cut off oil exports to "hostile” European nations as tensions rise over the Islamic Republic's nuclear program.

Higher oil prices could hurt Indian consumers, too. Petrol prices in the country are already deregulated, and a continued rise in crude prices could eventually lead to a higher rates at the pump.

However, fuels such as diesel, LPG and kerosene are still administered by the government so as to ease the burden on lower-income and agricultural groups that depend on them heavily for basic needs. But a higher subsidy bill could put the fiscal deficit, already on its way to surpassing its target, further in the red, denting the government’s finances even more. The Indian government has also put off deregulation of these fuels for fear of stoking inflation as well as of upsetting key voter segments.

On Wednesday, Iran announced that it had started using new advanced centrifuges at its main uranium enrichment facility. Many Western nations, led by the United States, allege that Iran’s enrichment programme is aimed at making nuclear weapons while Tehran insists that the programme is a peaceful one aimed at boosting energy production.

European sales account for about 18 percent of Iran’s total crude exports and its main buyers include Greece, Italy and Spain.

Adding to the tensions, antagonism between Israel and Iran has recently escalated following a bomb attack on an Israeli diplomatic target in New Delhi, India, and a foiled attack in Georgia. In addition, three bungled bomb blasts in Bangkok led to the arrest of two Iranian nationals there.

Israel has accused Iran of waging a covert campaign of state terror.

Iran is one of India’s largest suppliers of crude, accounting for close to 12 per cent of its oil imports worth about $11 billion. India already faces a quandary about oil payments to Iran without violating international sanctions.

Also boosting prices were positive developments for the European debt crisis, as China confirmed it would continue investing in the safest EU bonds. In Greece, the head of the Conservative party, which along with the Socialists form the governing coalition, made a written commitment to the terms of the second bailout — a key requirement for the process to move ahead and prevent a default next month.

Still, a report edited by US energy trader and consultant Stephen Schork forecasts oil prices will fall due to caution at US petrol pumps, following a report that showed January retail sales grew only modestly.

Consumers are spending, but with higher food prices and new iPhones to buy, they are not spending at the pump,” Schork said.

In other energy trading, heating oil was up 3.8 cents at $3.2028 per gallon and gasoline futures added 3.86 cents to $3.0211 per gallon. Natural gas rose 2.3 cents to $2.555 per 1,000 cubic feet.

Tags: Bangkok, blasts, bomb, Brent, China, crude, EU, Europe, European Union, Georgia, Greece, ICE, Iran, Israel, Italy and Spain, London, LPG, New York Mercantile Exchange, Oil, Petrol, Rostam Qassemi, Stephen Schork, Tehran