Oil rises to $113 over Iran supply

Oil climbed to around $113 a barrel yesterday as concern over any possible supply disruption due to mounting tensions between Iran and the West countered worries about Europe's economy. Crude was set to rise more than 5 per cent in the first week of 2012 after Iran threatened to shut the Strait of Hormuz, the world's most important oil route, in retaliation against tighter sanctions from the US and a possible ban on its crude exports to Europe. Brent crude rose 32 cents to $113.06 a barrel by 1234 GMT, after declining by 96 cents on Thursday. US crude was up 51 cents to $102.32. "The supply risk regarding Iran is still boiling. On top of this, there is also supply risk from Nigeria," said Carsten Fritsch, analyst at Commerzbank. Article continues below "It is clear yesterday's drop was a short-term one only and unlikely to be continued." Eurozone debt Still, investors are balancing the supply risks with Eurozone debt problems that may worsen and drag down major economies, slowing oil demand. An unexpected 2.2 million-barrel rise in US crude stockpiles also weighed on sentiment. Deutsche Bank, in a report on its outlook for commodities in 2012, remained bullish on oil. "Upside geopolitical risks outweigh the potential downside on prices from a slowing economy," the bank said. "Inventories are relatively low and supply and demand fundamentals point to declining Opec spare capacity over time." In Nigeria, a force majeure on Bonny Light crude oil exports on Thursday underscored the fragility of supplies from Africa's top exporter, where trade unions are threatening to call a national strike starting on Monday. Thursday's fall in prices illustrates there is strong resistance for Brent at $115 a barrel, said Olivier Jakob of Petromatrix. To the downside, key support lies at the 200-day moving average at $112.74, which held on Thursday. Investors are worried the Eurozone debt crisis could worsen and weigh on growth in the US and China. The euro was under pressure yesterday on signs that fallout from the Eurozone's debt crisis is hitting its banks.