Iran's export ban sends Brent to 8-month high

Brent surged to an eight-month high yesterday as Iran announced it would stop exports to six EU countries.

Brent surged to an eight-month high yesterday as Iran announced it would stop oil exports to six EU countries in response to the embargo on its crude that will take effect in July.

Italy, Spain, France, Greece, Portugal and the Netherlands will no longer be supplied with Iranian crude, according to Iran's state-run Press TV. This sent the price of Brent, the benchmark for oil traded into Europe, rising to US$118.6 a barrel, the highest since last June.

Crude futures traded in New York rose by as much as 1.8 per cent to $102.54, a one-month high. The EU decided on the embargo last month, after a decision by the US to impose a fourth round of sanctions on Iran.

The EU countries targeted by Tehran with a ban include the Mediterranean economies that would be worst hit by a decline in oil supply and whose governments had negotiated a delay to the embargo.

The US and the EU accuse Iran of taking steps towards developing nuclear weaponry. Tehran insists it is pursuing a nuclear programme only for civilian purposes.

Brent prices were further supported by news that China had offered to help to resolve Europe's sovereign-debt crisis. The prospect of a military confrontation that could cause the closure of the Strait of Hormuz, the strategic waterway through which 30 per cent of world crude supply passes, had already added a $10 premium to oil prices.

Analysts also warn that spare production capacity, largely held in Saudi Arabia, is declining.

"Opec spare capacity is approaching dangerously low levels, just as world economic growth is beginning to strengthen," said David Greely, the head of energy research at Goldman Sachs in New York.

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