Crude and product futures settled higher in moderate pre-holiday US trading Tuesday as tensions escalated between the West and Iran.
NYMEX August crude settled $3.91 higher at $87.66/barrel, after reaching an intra-day high of $88.04/b.
ICE August Brent settled $3.34 higher at $100.68/b. Front-month ICE Brent futures climbed above $100/b for the first time since June 11. Front-month Brent futures are up around 13% since hitting an 18-month low on June 22.
In products, NYMEX August RBOB settled 9.90 cents higher at $2.7229/gal. Heating oil futures settled 8.26 cents higher at $2.7585/gal.
"The possibility of quantitative easing, Iranian military exercises that raise geopolitical tensions, and an ongoing partial strike by Norwegian oil workers are all helping to support the advance" in crude and products, Citi Futures Perspectives analyst Tim Evans wrote in an afternoon note.
The IMF, in a report released Tuesday, highlighted the risks remaining of "excessive fiscal tightening in the United States," suggesting action should be taken to avoid what the report referred to as the US "fiscal cliff."
Analysts believe the IMF is trying to cajole US policymakers into moving forward with another round of stimulus.
"We have Iran, a weaker dollar, and the IMF telling [the US] to do more stimulus, and people don't want to be short going into a holiday," said Phil Flynn, senior market analyst for Price Futures Group.
IRAN'S PARLIAMENT RATTLES SABERS
Iran helped to ratchet up tensions after the start of the latest round of US and EU sanctions as a large number of parliamentarians there signed a bill that would back the preventing of tankers from exiting the Persian Gulf via the Strait of Hormuz.
Meanwhile, the US has moved "significant" military reinforcements into the Persian Gulf to keep the key Strait of Hormuz open to oil shipping and boost the number of fighter planes capable of striking deep into Iran if the standoff over Tehran's nuclear program escalates (See story, 1519 GMT).
Western leaders have stressed that they want a diplomatic solution to the impasse, and have been intensifying pressure on Iran through increasingly tough sanctions.
First exports from Abu Dhabi's new 1.8 million b/d pipeline, meant to skirt the crucial strait, are not expected before end-July, senior oil officials said Tuesday (See story, 1540 GMT).
The pipeline, which will have capacity to carry 1.8 million b/d of Abu Dhabi's crude, was due to start up in January 2011, but has been delayed repeatedly because of problems with pumping stations along the 36-km (250-mile) route from the Habshan fields to the emirate of Fujairah.
And more uncertainty loomed for Norwegian production as unions decided Tuesday to continue their strike over pension arrangements.
Now in its second week, the strike was called on June 24 after a breakdown in talks over pensions. Norwegian daily crude output has fallen by some 240,000 b/d, representing some 15% of the country's oil output.
