Oil held above $123 a barrel today and was heading for a fifth straight weekly gain, as concern over cuts in Iranian supply offset worries high oil prices could restrain demand.
European buyers of Iranian oil have cut back on purchases ahead of a European Union embargo on imports of Iran's oil effective July 1st. Some of Iran's biggest customers in Asia including China have also reduced purchases.
Brent crude eased by 13 cents to $123.49 by 11am, after trading as high as $124.28 earlier. It reached $124.50 yesterday, the highest intra-day price since May 3rd.
"The supportive factors are on the supply side - Iran and Iran and Iran, with a bit of Syria and Sudan," said Christopher Bellew, a broker at Jefferies Bache in London. "It would not be at these numbers if it was not for the supply-side problems."
US crude was up 37 cents to $108.20, extending its rally into a seventh day, its longest rising streak since a 10-day gain in December 2009.
Japan, the world's third-largest oil importer, may cut Iranian crude imports by a more-than-expected 20 per cent as it seeks a waiver from US sanctions. Last year, the country bought almost 9 per cent of its crude from Iran.
Iran said yesterday it had maintained oil production levels despite sanctions, but analysts said they suspected Tehran was storing crude at sea while looking for new customers to evade Western measures.
Brent's premium to US crude narrowed to $15.26 as inventories at Cushing, the delivery point for US crude, fell last week. The spread had widened to over $20 earlier in the month on rising stocks in the US Midwest.
Supply concerns over Iran, as well as production losses in Syria and South Sudan, have offset concern about economic problems in Europe and a weaker global demand outlook.
In euro, the price of Brent reached a record high yesterday, adding rising fuel costs to the euro zone's debt troubles. The euro traded near 10-week high against the dollar and European shares edged up.
Greece's second bailout since 2010 was sealed by euro zone finance ministers on Tuesday, averting the threat of a chaotic default next month but doing little to allay doubts about the country's long-term financial stability.
Oil demand in Europe is falling and consumption in the United States - the world's top consumer - has hit the lowest level in nearly 15 years, a report from the Energy Information Administration showed this week.
Even so, upbeat US economic data yesterday pointed to a more robust picture for demand. The number of Americans filing new claims for jobless benefits held at a four-year low, while December home prices rose 0.7 per cent.
Reuters
