SINGAPORE (Reuters) – Oil rose more than 1 percent to over $63 a barrel on Tuesday after Iran threatened to use oil exports as a weapon following the U.N. Security Council’s decision to impose sanctions on its trade in nuclear goods.
Chillier weather approaching the U.S. Northeast and news Abu Dhabi had become the first to implement fresh OPEC supply cuts added to the gains that followed two days of losses.
U.S. crude climbed 66 cents or 1.06 percent to $63.07 a barrel by 1102 GMT in electronic trade. Brent crude jumped 78 cents to $63.20 a barrel.
After months of deadlock over Iran’s dispute with the West in connection with its nuclear program, the Security Council agreed at the weekend to impose sanctions on Iran’s trade in nuclear materials and technology, drawing a warning from Tehran.
“If necessary, Iran will use any weapon to defend itself,” Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday. In the past he has said Iran would prefer not to play the oil card.
Iran, the world’s fourth-largest crude producer, has condemned the resolution as illegal and on Sunday vowed to speed up enrichment work, which could heighten tensions.
Oil prices rose earlier in the year in response to fears Iran might cut its oil exports or disrupt Gulf shipping as its row with the West escalated. The issue had faded since summer as the U.N. appeared unable to agree on how to deal with Tehran.
Some analysts said traders might shrug off the latest developments unless they saw concrete evidence of supply disruption.
“It is certainly a bullish factor, but I think geopolitical matters will be ignored unless clearer risks materialize,” said Makoto Takeda, energy analyst at Bansei Securities Co.
Tuesday’s gains followed price falls of just over $1 last week when the market retreated from a mid-week peak of $64.15 as traders bet unusually warm weather in the U.S. Northeast would reduce oil demand.
DTN Meteorlogix said on Monday temperatures in the U.S. Northeast had averaged 10-16 degrees Fahrenheit (5-8C) above normal over the long Christmas holiday weekend. But conditions were set to grow chillier, nearing normal by Saturday.
OPEC news lent some support as Abu Dhabi’s state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February, the first sign of an OPEC member delivering a second round of output curbs agreed this month.
The new 500,000 bpd cuts are scheduled to take effect in February, giving the producer group time to assess whether peak winter demand will be strong enough to reduce swollen consumer inventories.
Violence in OPEC member Nigeria also helped to push prices higher.
On Saturday a car bomb exploded outside the headquarters of the Rivers State government in Port Harcourt, but no-one was killed. The MEND group, which has also targeted oil installations and workers, claimed responsibility.
Given growing geopolitical risks and the start of a new year, some analysts predicted a new flow of investment-class money could push prices higher.
“We expect another influx of financial money into oil in the coming weeks, and geopolitical threats, such as Iran and Nigeria, remain active,” said Mike Wittner, head of energy market research at Calyon Corporate and Investment Bank.