Brent oil prices hit an eight-month high today, driven by simmering geopolitical tensions over key crude producer Iran and optimism the Greek debt crisis can be resolved, traders said.
Brent North Sea crude for April delivery hit $120.70 per barrel, its highest point since 14 June. It later pulled back to $119.32, down 79c from yesterday's closing level.
New York's main contract, West Texas Intermediate light sweet crude for delivery in March, rose 52c to $102.83.
"Greater risk appetite in the light of hopes of financial assistance for Greece, coupled with the Iran crisis, have caused Brent to climb to an eight-month high of over $120," said Commerzbank analyst Carsten Fritsch.
"Admittedly, Iran has denied reports of an immediate ban on oil shipments to the EU, yet consumers in Europe already appear to be preparing themselves for just such an eventuality," Mr Fritsch said.
"According to industry sources, the leading European oil companies have slashed their March oil imports from Iran by more than 300,000 barrels per day.
"This is prompting additional demand for alternative oil types and is thus causing prices to rise."
The market gained ground on continued tension between Western powers and Iran, as well as positive economic data from the United States, analysts said.
"Ongoing Iranian tensions and the threat of disruption to oil supplies continue to be the main driver in the oil price," said VTB Capital economist Neil MacKinnon.
"In addition, better US economic data and improving risk appetite in the equities market also provides support."
Tehran has been slapped with four sets of UN sanctions, in addition to a raft of unilateral US and EU sanctions, designed to halt a programme that the West fears masks a drive for atomic weapons.
Oil prices were also supported by news that US unemployment benefit claims fell to a four-year low last week, indicating a labour market recovery in the world's biggest economy and largest oil consumer.
The US Department of Labour yesterday said applications for unemployment insurance payments dropped by 13,000 to 348,000 last week.
Meanwhile, traders are also closely watching the situation in the North Sea, where output is set to fall for a third month in March due to maintenance work.
