Iran Threatens to Cut Supply Among EU Supply

Oil prices climbed above $98 per barrel Tuesday February 7, 2012 after Iran again threatened to cut off supplies to Europe.

Iranian lawmakers are pushing a plan to halt crude exports crude to Europe before the European Union begins an oil embargo this summer. The EU embargo is part of a broader strategy by Western nations to pressure Iran to abandon a nuclear program that the U.S. and other nations believe is developing weapons.

Iran, the world's fourth-largest oil producer, ships 18 percent of its crude exports to the European Union. When the embargo takes effect in August, experts predict Iran will make up for the lost business by selling more oil to China and India. European nations say they need time to find new suppliers.

Iran is trying to speed up the process and force the EU to replace its oil sooner than expected.

"Iran will make the sanctions ineffective as it did in the past, and it will continue selling oil," Iranian Vice President, Mohammad Reza Rahimi said in a statement reported Tuesday by the official IRNA news agency.

On Monday President Barack Obama announced sanctions on Iran's central bank that will make it harder for Iran to sell its oil to other countries.

Benchmark U.S. crude rose by $1.50 on Tuesday to end the day at $98.41 per barrel in New York. Brent crude, used to price foreign oil varieties, rose by 30 cents to finish at $116.23 per barrel in London.

U.S. oil prices were on the decline in recent days, as supplies grew at the important Midwest distribution hub in Cushing, Okla. The possibility of Iran stopping crude sales to Europe, and creating tighter supplies, boosted prices around the globe.

PFGBest analyst Phil Flynn said there was some "panic buying" Tuesday because there was concern that Iran really would cut off the oil to Europe.

Encouraging economic news in the U.S. also helped push oil prices higher. The government said that the number of available jobs jumped to a three-year high in December, another sign that the economy continues to recover. And the Federal Reserve said consumer borrowing rose by $19.3 billion in December after a $20.4 billion gain in November. Those are the biggest monthly gains in a decade, and bode well for more consumer spending and greater energy demand.