Oil futures rose 1.4% Friday following a report that Iran had reduced its oil exports, as worries about supply disruptions continue to roil the oil markets.
Benchmark U.S. crude rose sharply following the report from Reuters that Iranian exports in March had fallen 300,000 barrels a day, or 14%, citing industry sources. The report prompted a sudden run-up, sending oil prices spiking as much as 3% to their highest level in three weeks, before paring much of those gains to end the day modestly higher.
"You have a volatile market where not everybody knows whether it should be going up or down," said Carl Larry, president of Oil Outlooks and Opinions in New York. "The market's sensitive here."
The sharp move unfolded over a matter of minutes, as multiple large contract orders rolled through the market shortly before 10 a.m. EDT.
Light, sweet crude for June delivery settled $1.52, or 1.4%, higher at $106.87 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently rose $1.97, or 1.6%, to $125.11 a barrel.
Market observers said Friday's volatility underscored that supply concerns remain the dominant driver of oil prices, even as demand remains weak in many countries. The escalating standoff between Iran and the West has sent oil prices rising steadily this year amid worries that the tensions could translate into a supply disruption or a military conflict.
"That story came across about the Iranian exports and that really shook the market," said Rich Ilczyszyn, chief market strategist at brokerage iiTrader.com.
The U.S. and its allies have been applying increasingly stringent sanctions against Tehran in recent months in an effort to curb its nuclear work. Iran says its nuclear program is for peaceful purposes, although the U.S. and Europe are concerned that the country is developing a nuclear weapon.
President Barack Obama on Friday said that tensions in Iran and the Middle East are adding about $20 to $30 a barrel to the price of oil and is helping drive up the price of gasoline.
"Right now, the key thing that is driving higher gas prices is actually the world's oil markets and uncertainty about what's going on in Iran and the Middle East," he told the AAA auto club in an interview.
Some analysts say the standoff with Iran could still be resolved peaceably, a development that would likely send oil prices sliding. Friday's report on exports notwithstanding, few fresh headlines have emerged from Tehran about its nuclear program recently.
"I really think there's some kind of backdoor deal happening right now," Ilczyszyn said. "In the last week or so the news has really died down on Iran."
Front-month April reformulated gasoline blendstock, or RBOB, settled 4.56 cents, or 1.4%, higher at $3.3852 a gallon. April heating oil settled 3.14 cents, or 1%, higher at $3.2101 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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