LONDON – Oil prices rose on Monday after Iran ended snap U.N. checks of its nuclear sites and said it was resuming uranium enrichment, sparking fears it might ultimately withhold oil exports.
OPEC's second biggest producer has said it will not use oil as a political weapon, but investors fear worsening relations between Tehran and the U.N. Security Council may lead to a disruption in some 2.4 million barrels of daily crude sales.
U.S. crude had leapt more than $1 in early trade, but later was up 43 cents at $65.80 a barrel on the New York Mercantile Exchange. London Brent gained 63 cents to $64.02.
Iran has warned that any sanctions against it would send oil prices beyond a level industrialized economies could bear.
"Our enemies cannot do a damn thing. We do not need you at all. But you are in need of the Iranian nation," President Mahmoud Ahmadinejad told a crowd in Tehran on Sunday.
Oil has been on the ascent since late December, rising in tandem with tension in OPEC producers Iran and Nigeria and amid an infusion of investment from big-money funds.
Prices touched $69.20 on Jan. 23, nearing August's record $70.85, but have eased as global inventories pile up.
Yet fears of supply disruptions continue to keep consumers on edge.
"While (Iran) said last week it would separate nuclear and oil as issues, it was only last year it said oil could be used as a weapon to get its own way on nuclear," said David Thurtell, commodity strategist at the Commonwealth Bank of Australia.
"This all adds fuel to the fire for those concerned about oil supply."
Iran reacted swiftly to Saturday's International Atomic Energy Agency decision to report it to the Security Council, even though the top U.N. body will take no action until the IAEA delivers a full report in March.
Tehran says it needs nuclear technology only to generate electricity.
The Security Council has the power to impose political and economic sanctions but there are divisions among its five permanent members about how to deal with Tehran.
Russia is working particularly hard to avoid sanctions.
Chavez warned he could shut Venezuelan oil refineries in the United States and sell oil for the U.S. market elsewhere if Washington cut off ties. U.S. officials have made no suggestion of breaking relations.
He also signaled that OPEC price hawk Venezuela wants to keep oil at current levels.