NEW YORK – Oil prices climbed to a 2007 high above $63 a barrel Monday on growing tension between Iran and the West over Tehran's nuclear work and its capture last week of British military personnel.
U.S. crude settled 63 cents higher at $62.91 a barrel, the highest settlement since Dec. 20, after hitting a high of $63.30 in earlier activity. In London, Brent crude gained $1.23 to $64.41 a barrel.
The standoff between Western nations and Iran has added to market supply worries, although there has been no disruption to the OPEC member's oil exports of around 2.2 million barrels per day.
"Perhaps a couple of dollars of risk premium has returned," said Mike Wittner of investment bank Calyon. "Prices have ticked up but, I think, as the market digests the news, other things being equal, the Iran risk premium will start to fade again."
On Sunday, Iran said it would limit cooperation with the United Nations' nuclear agency and resolved not to halt atomic work after the Security Council voted to impose new sanctions.
Oil rose on Friday after Iran seized 15 British naval personnel in the Gulf.
Iran is the world's fourth-largest oil exporter, while countries in the Middle East pump more than a fifth of the world's daily oil production of some 85 million bpd.
Additional price support came from news of refinery problems at the fifth biggest U.S. refinery, a BP Plc plant in Whiting, Indiana.
"The (energy) markets are very bullish on the Iran situation and were also helped by the refinery fire at Whiting," Phil Flynn of Alaron Trading in Chicago said.
Supply concerns helped push U.S. gasoline futures to a peak of $2.07 a gallon on Monday, the highest level since Aug. 16.
Higher oil prices and a weaker-than-expected U.S. new-home sales report helped pushed U.S. stocks lower as investors worried about the economic health of the world's top energy consumer.
'MUCH TOO HIGH'
The head of the International Energy Agency, an adviser to 26 industrial countries, said on Monday that prices were too high and producers should increase output.
"The current price is much too high and OPEC should raise production, but consuming countries also have to cut consumption," IEA Executive Director Claude Mandil told Reuters.
Oil surged to a record high of $78.40 last July on concern that the conflict between Israel and Hizbollah guerrillas could spread to more Middle East countries. Rising tensions were likely to continue to support prices, analysts say.
A Reuters poll of analysts forecast weekly U.S. government inventory data to be released on Wednesday would show a rise of 1.9 million barrels in crude stocks for last week.
Gasoline stocks were expected to have decreased by 2.3 million barrels, with distillate stocks down 1.3 million barrels, due to seasonal refinery maintenance.
U.S. crude prices have gained about 26 percent since hitting a 20-month low of $49.90 in mid-January, boosted by falling gasoline inventories in the United States ahead of peak demand in the summer.