US oil price heading back closer to $100 a barrel as Middle East tensions mount

4 February 2013 4 February 2013

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The price of US WTI crude looks set to test the magic $100 a barrel mark as tensions in the Middle East have traders back on buy mode, while analysts warned that trading could be all over the place or choppy at least.

Latest WTI Oil Price

US Light crude oil futures for March 2013 delivery was trading at $96.88 a barrel, 13:02 GMT today in electronic trading on the NYMEX. The contract is currently 0.8 percent lower today, mainly due to a higher Dollar Index, however sentiment is also playing a part.

Meanwhile, in London, bullish bets on Brent crude rose to the most in more than two years last week, according to data from ICE Futures Europe.

A stronger US dollar weighed on oil prices today by making crude more expensive for traders using other currencies. “We expect some further correction lower in the oil market today, as the strengthening US dollar currently weighs on oil prices, while investors would like to lock in recent gains,” analysts at Sucden Financial Research in London said.

Nuclear Talks in Limbo

Nuclear talks concerning Iran which involving all five permanent members of the UN Security Council plus Germany have made little headway, while several rounds of sanctions have cut into Iran’s oil sales and financial transactions. Tension over Iran’s uranium enrichment plan continued to bubble after a plan to upgrade its refining equipment was delivered to the UN nuclear agency.

“The market realises that geopolitical jitters will escalate at the end of the UN talks with Iran. If Iran courts this nuclear enrichment program, then there is a risk of war in the Persian Gulf,” said Gordon Kwan, head of energy research at Mirae Asset Securities Ltd.

A regional war could threaten energy supplies from Middle Eastern producers, sending oil prices rocketing higher.

US & European Oil Price Spread

The spread between Brent and US crude widened by to over $18 a barrel last week on concern about supply stemming from conflict in the Middle East buoyed prices of Brent, the main gauge for global oil prices.