Oil futures pushed higher Tuesday, lifted by concerns about Iran's nuclear program and a stock-market rally.
Light, sweet crude for February delivery settled 93 cents, or 0.9%, higher at $102.24 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled up 83 cents, or 0.7%, to $113.28 a barrel.
European Union officials moved up a meeting to discuss sanctions on Iranian crude-oil exports. The meeting among EU foreign ministers is now set for Jan. 23, a week earlier than originally planned, and follows an agreement in principle by the EU to enact an embargo on purchases of Iranian oil.
The meeting and likely sanctions mark the latest escalation of tensions between Iran and Western countries. The sanctions are aimed at curbing the country's nuclear program. Iran has responded with military exercises and threats to close the Strait of Hormuz, the waterway through which about a third of the world's sea-borne crude passes.
"There could be huge upside in oil prices" if Iran were to succeed in closing the strait, said Tom Bentz, director at BNP Paribas Prime Brokerage Inc., though whether it could remains unclear. "The market's just factoring in that fear."
Iran is the second-biggest producer in the Organization of Petroleum Exporting Countries and supplies the EU with 450 million barrels of oil a day, according to the U.S. Energy Information Administration. Sanctions would require EU members to find alternate sources of crude, which market participants worry could squeeze prices.
Still, even if the EU approves an Iranian oil export ban, any shortfall could be made up by increased production by other OPEC members, Bentz said.
"A lot of those countries are already looking for alternate supplies," he said.
The escalating row between Iran and the West has been a key factor keeping Nymex crude above $100 a barrel over the last week, despite persistent worries about Europe's sovereign debt crisis and continued economic weakness in the U.S.
Although worries about Iran's nuclear program have weighed on policymakers for years, the concerns heightened after the International Atomic Energy Agency accused Iran in November of developing technologies needed to develop a nuclear weapon. The IAEA late Monday confirmed that Iran has begun enriching uranium at a new site deep in the mountains near the city of Qom.
Earlier this month, the U.S. enacted sanctions that bar companies from dealing with Iran's central bank, which processes the country's oil revenues.
Separately, crude prices also benefited from Tuesday's rally in U.S. equities. The Dow Jones Industrial Average was set to close at a five-month high, lifted by a strong outlook on 2012 production from aluminum-maker Alcoa.
Oil futures have closely tracked equities in recent months, as traders look to financial markets for guidance about the broader economic outlook. The blue-chip index was recently up 0.6% to 12471.
Front-month February reformulated gasoline blendstock, or RBOB, settled up 1.38 cents, or 0.5%, to $2.7728 a gallon. February heating oil settled up 2.84 cents, or 0.9%, to $3.1014 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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