NEW YORK – Oil briefly topped $65 a barrel Thursday for the first time in three months as tension over Iran's nuclear ambitions stoked fears of a supply disruption from the world's fourth biggest crude exporter.
U.S. crude oil futures struck $65.10 a barrel on the New York Mercantile Exchange, the highest since early October, before profit-taking pulled prices back to $63.94, unchanged on the day. London Brent crude settled up 45 cents to $62.62.
Oil prices have risen about 10 percent since late December, supported by simmering tensions in the Middle East that spurred an influx of speculative cash, and bringing them back within reach of the peak $70.85 hit in August.
"The way things are turning out, Iran seems to be oblivious to world pressure and could be headed for a showdown with the West," said Phil Flynn, analyst at Alaron Trading in Chicago. "This is potentially very bullish for crude."Iran has said it aims to develop a civilian nuclear power program, but the international community suspects it is seeking to develop an atomic bomb.
The foreign ministers of Britain, France and Germany, meeting in Berlin Thursday, said talks with Iran had reached a dead end and agreed it should be hauled before the U.N. Security Council over its nuclear program.
Oil analysts said there is concern the dispute could result in sanctions that curb the OPEC-member's oil exports.
"Clearly that's a possibility," said Frederic Lasserre of SG Commodities in Paris. "Iran has been so aggressive ... and has repeated several times very aggressive comment ... Of course the market is very sensitive."
If Iran halted exports of around 2.4 million barrels per day (bpd), the rest of the world's spare capacity would struggle to make up the shortfall.
Oil traders are also nervous about the situation in Nigeria, the world's eighth largest oil exporter, where twin attacks on Royal Dutch Shell oil facilities cut output by 10 percent.
In the first attack Wednesday, unidentified armed men kidnapped four foreign workers from an offshore oilfield, forcing the company to shut the 120,000 bpd field.
In the second, an explosion on a major crude pipeline cut exports by a further 100,000 bpd.
U.S. oil giant Exxon Mobil Corp. (XOM) Thursday denied a report that 80 of its workers were taken hostage on an oil rig in Nigeria, saying a contractual dispute was being resolved and operations on the rig were normal.
Concern about supply disruptions outweighed the impact of U.S. inventory data released Wednesday that showed stockpiles of heating oil, all-important during the Northern Hemisphere winter, had increased, after mild weather in key consuming regions reduced demand.
Gasoline inventories also rose sharply, though overall crude supplies fell by more than anticipated after refineries increased activity.