NEW YORK – Oil struck a three-month high Wednesday on concerns Iran's nuclear ambitions could draw international sanctions that disrupt crude flows from the world's fourth biggest exporter.
U.S. crude futures hit $64.80 a barrel, the highest since early October, before settling up 57 cents at $63.94 on the New York Mercantile Exchange. London Brent crude ended at $62.17, up 25 cents.
Britain on Wednesday called for the U.N. Security Council to consider action against Iran after it vowed to resume nuclear fuel research, and Washington said a referral to the body was "more likely than ever".
"Iran is driving it today, throwing jitters into the market. The idea is that this dispute over Iran's nuclear program may lead to international sanctions that could interrupt the flow of crude," said Kyle Cooper, oil analyst at Citigroup Global Markets.
Some analysts downplayed the possibility Iran would use oil as a weapon, saying withholding supplies would be a double-edged sword for the OPEC nation.
"The Iran situation is a concern to the degree that it could lead to a supply disruption. But I don't think it will come to that. They need the revenues more than the global market needs their oil," Joe Arsenio of Arsenio Capital Management in Larkspur, California said.
Oil prices have risen more than 10 percent since last December, supported by simmering tensions in the Middle East that spurred an influx of speculative cash.
Further support for oil prices came from U.S. government data which showed a 2.9 million barrel draw in crude stocks last week, which partially offset a 4.9 million barrel build in distillate inventories on warmer weather.
Mild winter temperatures were expected in the U.S. Northeast, the largest heating oil market, for the next 10 days, forecasters said.
Gasoline supplies increased by 4.5 million barrels.
Despite the build in products stocks, traders said expectations of strong demand and refinery problems gave crude oil prices a boost, traders said.
BP Plc.'s (BP) giant oil refinery in Texas City, Texas, will resume fuel production in March, three months later than initially expected, sources familiar with the plant's operations told Reuters on Tuesday.
The nation's third largest oil refinery was completely shut in September in advance of Hurricane Rita.