Oil at six-week high on Iran worries

7/3/2012

Oil at six-week high on Iran worries

SAN FRANCISCO (MarketWatch) -- Crude-oil futures traded at their highest since late May, shaking off the previous session's losses and weak early trading to gain on a flare-up of geopolitical concerns about Iran.

Crude for August delivery gained $3.64, or 4.4%, to $87.44 a barrel on the New York Mercantile Exchange. The front-month contract had earlier traded as low as $83.33 a barrel. After Monday's losses of 1.4%, traders were back to worrying about a potential disruption in oil markets as Iran chafed against Western sanctions.

An army general in Iran was reported as saying the country wouldn't "sit idly" by as the U.S. and Europe built a missile-defense shield program that could target Iran. Iranian authorities staged missile drills late Monday to test weapons reportedly capable of hitting targets as far away as Israel and announced possible legislation aimed at closing the Strait of Hormuz.

The drills and news of the legislation came as U.S. and European embargoes on Iranian oil recently took effect. .

Iranian rhetoric was "likely just bluster, but it is the kind of noise that has sparked price rallies in the past," said Citi Futures Perspective analyst Tim Evans in a note to clients.

Other energy futures traded higher on Tuesday, with gasoline the top gainer. August gasoline rose 10 cents, or 3.8%, to $2.72 a gallon. Heating oil also for August gained 8 cents, or 3%, to $2.76 a gallon. Natural-gas futures for delivery in the same month advanced 4 cents, or 1.5% to $2.87 per million British thermal units.

DOW JONES NEWSWIRES

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