Oil Hovers Above $101 Amid Rising Iran Tensions

Published December 28, 2011 9:18AM (EST)

SINGAPORE (AP) — Oil prices hovered above $101 a barrel amid investor concern that rising Middle East tensions could disrupt crude supplies.

Benchmark crude for February delivery rose 6 cents to $101.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.66 to settle at $101.34 in New York on Tuesday.

In London, Brent crude was down 12 cents to $109.15 a barrel on the ICE Futures exchange.

Iran's official news agency IRNA reported Tuesday that Vice President Mohamed Reza Rahimi said his country will close the Strait of Hormuz, cutting off oil exports, if Western nations impose sanctions on Iran's oil shipments.

The U.S., the U.K. and other nations are mulling more sanctions against Iran, the world's fourth-largest oil producer, over concern about its nuclear power program.

The Strait of Hormuz, the choke point of the Persian Gulf, is one of the world's busiest routes for crude shipments with about a sixth of the world's oil production passing through.

If tankers could not use the strait, they would have to take longer, more expensive routes to their destinations, which would likely boost prices.

"We doubt political posturing will turn into action, but oil remains above $100 regardless," energy consultant and trader The Schork Group said in a report.

Schork estimates crude would jump to above $140 if Iran closed the Strait of Hormuz.

Signs the U.S. economy is improving also helped bolster crude. The New York-based Conference Board said its Consumer Confidence Index jumped almost 10 points from November, to 64.5, the highest since April.

The National Retail Federation said it expects a 3.8 percent increase in Christmas holiday sales, up from its forecast of 2.8 percent in September.

In other Nymex trading, heating oil rose 0.2 cent to $2.92 per gallon and gasoline futures slid 0.3 cents at $2.68 per gallon. Natural gas was down 2.1 cents to $3.09 per 1,000 cubic feet.

By Salon Staff

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