Oil up to above $99 as EU imposes embargo on Iran

January 23, 2012 - 11:55 AM

LONDON (AP) — Oil rose above $99 a barrel Monday after the European Union formally adopted an oil embargo against Iran to pressure it to resume talks on its nuclear program.

The 27-nation EU will freeze the assets of Iran's central bank, stop new contracts for crude oil and petroleum products, but allow existing contracts to run until July.

After news of the move, benchmark crude for March delivery rose about a dollar to trade 90 cents higher on the day at $99.23 a barrel in early morning European time in electronic trading on the New York Mercantile Exchange. The contract fell $2.21 to end at $98.33 per barrel in New York on Friday.

Brent crude was up 90 cents at $110.76 a barrel on the ICE futures exchange in London.

Benchmark oil has ranged from about $98 to $102 in the past week due to tensions over Iran. The country has threatened to close the Strait of Hormuz in the Persian Gulf, through which a fifth of the world's oil supplies flow, if the U.S. and other countries impose more sanctions on it because of its nuclear program.

Many analysts doubt that Iran could set up a blockade for long, but any shortages would cause supplies to tighten.

Gains in oil prices were limited, however, by concerns that Greece's talks to lower its privately-held debt were being delayed.

A deal in Athens is required to avoid a default this spring as it would allow the country to receive a second bailout package from other European governments and the International Monetary Fund. It would cut Greece's debt from an estimated 160 percent of its annual economic output to 120 percent by 2020.

That is still painfully high, but without the help, Greece will not be able to pay euro14.5 billion in debt due March 20. A Greek default would send borrowing costs higher across Europe and could trigger chaos in the global financial system.

In other energy trading on Nymex, gasoline was up 2.7 cents at $2.81 a gallon and heating oil was up 3.9 cents at $3.03 a gallon. Natural gas futures rose 12 cents to $2.46 per 1,000 cubic feet.