Oil up at $107 amid Greek debt talks, Iran tension

Oil rises to $107 in Europe amid Greek debt talks, tensions over Iran's nuclear program

Associated Press
Oil up at $107 amid Greek debt talks, Iran tension
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In this Feb. 28, 2012 photo, a delivery driver connects hoses on a gasoline tanker, prior to replenishing the tanks at a BP station in Pittsburgh. The nationwide average for regular unleaded slipped less than a penny to $3.764 per gallon on Tuesday, March 6,2012. That ended a streak of price hikes that began on Feb. 8. (AP Photo/Gene J. Puskar)

Oil prices climbed to above $107 a barrel Thursday on a combination of optimism about the Greek debt crisis and concerns that tensions over Iran's nuclear program are lowering crude supplies.

By early afternoon in Europe, benchmark oil for April delivery was up 90 cents to $107.06 in electronic trading on the New York Mercantile Exchange. The contract rose $1.46 to settle at $106.16 per barrel in New York on Wednesday.

In London, Brent crude was up $1.26 at $125.38 per barrel on the ICE Futures exchange.

Commodities were in step with rising equity markets, optimistic that Greece will be able to complete a bond swap plan with private investors aimed at cutting €107 billion ($140 billion) off its national debt.

Crude has risen from $96 last month to near 10-month highs because of worries a military conflict over Iran's nuclear program would disrupt global oil supplies. The U.S. and Europe have imposed sanctions while Iran has threatened to halt crude tankers passing through the Persian Gulf.

Fueling the concerns, Royal Dutch Shell PLC, Europe's largest oil company, said Thursday it would soon stop buying oil from Iran, well ahead of a July deadline imposed by the European Union.

Iran agreed Tuesday to let international nuclear inspectors into its facilities. However, diplomats said Wednesday that satellite images of an Iranian military facility appear to show trucks and earth-moving vehicles at the site, indicating an attempted cleanup of radioactive traces possibly left by tests of a nuclear-weapon trigger.

"It is extremely unlikely that this latest round of possible negotiations will fundamentally reset Iranian relations with the West," commodities analyst Amrita Sen of Barclays Capital said in a report.

Low spare production capacity and crude inventories are also bolstering prices. According to the International Energy Agency, crude inventories in developed countries are now more than 65 million barrels below their average over the last five years and European stocks are at a 15-year low.

"It is not all 'geopolitical risk premium' in oil prices," Sen said. "The lack of spare capacity and inventories is playing an equally large part."

Analysts said the widening spread between the Nymex and Brent contracts, now over $18, could be attributed to rising U.S. inventories, where crude supplies grew by 800,000 barrels, or 0.2 percent, to 345.7 million barrels last week.

In the United States, "stocks have increased in six out of the past seven weeks," said a report from Commerzbank in Frankfurt.

Signs of an improving U.S. economy have helped raise oil from $75 in October. On Wednesday, payroll provider ADP estimated companies added 216,000 workers last month. The government is scheduled to announce its February jobs figures Friday.

In other energy trading, heating oil rose 2.85 cents to $3.2479 per gallon and gasoline futures added 2.59 cents to $3.3133 per gallon. Natural gas fell 0.7 cent to $2.295 per 1,000 cubic feet.

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Alex Kennedy in Singapore contributed to this report.

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