LONDON - Oil prices hit nine-month highs on Monday after Iran halted sales to France and Britain, and as China eased credit policy amid expectations of a bailout deal for Greece, analysts said.
The Brent and New York contracts reached $121.15 and $105.21 a barrel in Asian trading hours — the highest levels since May 5, 2011. Later in London midday trade, Brent North Sea crude for delivery in April stood at $120.55 a barrel, up 97 cents compared with Friday’s closing level.
New York’s main contract, West Texas Intermediate light sweet crude for March, jumped $1.61 to $104.85. “Iran’s decision to halt oil exports to France and Great Britain is commonly cited today as the reason for the price rise,” said Commerzbank analyst Carsten Fritsch.
“Since Iranian oil exports to both these countries are virtually negligible, however, the news is likely to have only a psychological effect, fuelling uncertainty on the oil market,” Fritsch said.
“The fact that EU finance ministers are expected to approve further assistance for Greece this evening, plus the lowering of the reserve requirement ratio for banks in China, are providing the financial markets with positive ‘background noise’.”
Iran on Sunday announced that it was halting its oil sales to France and Britain in retaliation for a phased European Union ban on its crude, which has yet to take full effect.
The decision is not expected to have a big impact as France last year bought only three percent of its oil — 58,000 barrels per day — from Tehran, while Britain is believed to no longer be importing Iranian oil at all.
But it is seen as a warning shot to other EU nations that are much more dependent on imports from the Islamic republic, including Italy, Spain and Greece.
“This latest move by Iran has not led to a price rise because it is going to lead to shortages of fuel in the UK and France, the price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West,” said Caroline Bain, commodities analyst at the Economist Intelligence Unit research group.
Iran pumps 3.5 million barrels per day, of which it exports 2.5 million barrels, making it the world’s fourth biggest oil producer. Oil traders also reacted to news at the weekend that China’s central bank decided to cut commercial banks’ reserve requirement ratio by 0.50 percentage points from February 24 to ease restrictions on lending.
The reduction by the People’s Bank of China in the amount banks must hold in reserve will bring the ratio for most large banks to 20.5 percent, effectively increasing the amount they can lend, Xinhua news agency reported.
The move is a sign the government is continuing to ease restrictions put in place to curb surging inflation and property prices, and follows the central bank’s last cut announced on November 30, which took effect on December 5.
“Crude oil, copper and a number of other financial markets received a boost from the policy rate cut,” said Prestige Economics president Jason Schenker.
Meanwhile, there were growing signs that a new bailout for Greece could be finalised at last. Eurozone finance ministers meet yet again on Monday on Greek debt and this time seem to have tightened the corset of conditions tightly enough to approve a massive rescue and avert an imminent default.