Oil at 9-month high after Iran cuts supply

By The Associated Press

Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country’s nuclear program.

By Monday afternoon, benchmark March crude was up $2.02 to $105.26 per barrel on the New York Mercantile Exchange, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday.

So far the surge in crude prices has not been reflected in gasoline prices in Michigan. The average price of a gallon of regular in metro Detroit Monday was $3.44, up 2 cents from Sunday, but down a penny from a week ago and a month ago, according to the AAA Daily Fuel Gauge.

Pump prices have spiked more noticeably on the East and West coasts. Unleaded regular averaged $3.96 Monday in the New York City area, up about 20 cents from a month ago. In southern California, drivers are paying an average of $4.07, up 33 cents from a month ago, the AAA data showed.

Iran’s announcement will likely have minimal impact on supplies because only about 3% of France’s oil consumption is from Iranian sources. Britain had not imported oil from the Islamic republic in six months.

“Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran — indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage,” said commodity analyst Caroline Bain of the Economist Intelligence Unit.

Markets in the U.S. were closed Monday for the Presidents Day holiday.

Iran’s oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran’s crucial fuel exports. They include a freeze of the country’s central bank assets and an oil embargo set to begin in July.

Iran’s Oil Minister Rostam Qassemi had warned this month that Tehran could cut off oil exports to hostile European nations. The 27-nation EU accounts for about 18% of Iran’s oil exports.

Tehran also is considering extending the embargo to other European countries, a semiofficial Iranian news agency reported Monday.

The head of Iran’s government oil company, Ahmad Qalehbani, was quoted by the Mehr agency as saying that the country would stop selling crude to nations that take action against Tehran.

Oil prices also rose on hopes that Greece’s new bailout deal would be approved on Monday as well as by China’s decision to boost the money supply in a bid to spur lending and economic growth.

China’s central bank said Saturday it will lower the ratio of funds that banks must hold as reserves, a move that frees tens of billions of dollars.

Oil has jumped from $96 earlier this month amid optimism the global economy may grow more this year than previously expected. J.P. Morgan raised its Brent crude price forecast to as high as $135 from $120.

On Monday, the April Brent crude contract was up 79 cents at $120.37 per barrel on the ICE Futures exchange.

Click video to hear audio