LONDON (Reuters) - Oil topped $100 (63.73 pounds) a barrel for the first time in three weeks on Tuesday as tension over Iran kept oil supply concerns in focus and investors bet on further policy action to support global economic growth.
Iran said on Tuesday it had successfully tested missiles capable of hitting Israel in response to threats of military action against the country. A European Union embargo against Iranian oil took full effect on Sunday.
An oil workers’ strike in Norway also has started to slow crude exports.
Brent crude was up $2.40 to $99.74 a barrel by 1124 GMT after climbing as high as $100.17 intraday, trading above $100 for the first time since June 11. U.S. crude rose by $2.27 to $86.02.
“The recovery has been aided by supply-side risks, which until recently tended to be overlooked,” Carsten Fritsch, an analyst at Commerzbank, said.
“Not even weaker data such as the U.S. ISM manufacturing index have checked oil’s advance. The situation would have been different a week ago, suggesting a change of mood on the commodity markets.”
The euro zone debt crisis and weak economic data from the top two consumers of oil, the United States and China, have fuelled expectations of government measures to ease monetary policy. European shares rose on Tuesday.
The European Central Bank is expected to cut interest rates to a record low on Thursday.
On the oil supply front, Iran’s National Security and Foreign Policy Committee has drafted a bill to try and stop oil tankers from passing through the Strait of Hormuz to countries that support sanctions against it.
Iranian threats to block the waterway have grown in the past year amid tightening Western sanctions over Tehran’s nuclear work, which Iran says is peaceful and the West suspects is aimed at weapons development.
About 17 million barrels a day of oil - almost a fifth of global production - from the top Middle East producers sailed through the narrow strait in 2011.
Coinciding with the start of the EU Iranian oil ban, Iran on Sunday announced the missile tests and threatened to wipe Israel “off the face of the earth” if the Jewish state attacked it.
“Iran is always a factor and it has the potential to have a dramatic impact on oil prices,” said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
“Traders are also expecting to see a policy response from China and a potential for more stimulus from the U.S. Federal reserve to support the economy.”
In Norway, the world’s eighth-largest oil exporter, a strike by oil and gas workers has led to a delay in the export of a cargo of Oseberg crude, according to a trading source. Oseberg is part of the North Sea dated Brent benchmark used as the basis for many of the world’s trades.
Reports this week, including from the American Petroleum Institute later on Tuesday, may show a further drop in U.S. crude inventories on production cuts in the Gulf of Mexico because of Tropical Storm Debby.
Analysts in a preliminary Reuters poll expect a 2.2 million barrel drop in stocks.
Additional reporting by Ramya Venugopal and Jessica Jaganathan, editing by Jane Baird