Oil prices jumped to over $102 a barrel Tuesday amid concerns that rising tensions between Western powers and Iran could lead to crude supply disruptions.
Benchmark crude for February delivery soared $4.13 to $102.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 82 cents to settle at $98.83 in New York on Friday.
Global oil markets were closed Monday for the New Year's Day holiday.
In London, Brent crude was up $4.75, to $112.13 a barrel on the ICE Futures exchange.
On Monday, Iran test-fired a surface-to-surface cruise missile, part of 10-day naval maneuvers scheduled to end Tuesday. Iran's navy chief Adm. Habibollah Sayyari said the test showed the key oil passageway Strait of Hormuz is "completely under our control."
"The ever-growing frequency of intense saber-rattling and muscle flexing between Iran and the U.S. should keep the markets jittery and vulnerable to sudden price jumps," analysts at JBC Energy in Vienna said.
Iran has threatened to close the strait, where one-sixth of global crude exports pass, as possible retaliation to new U.S. economic sanctions over Iran's nuclear program.
"Renewed rhetoric out of Iran could force another rush of geopolitical risk premium into the market," energy consultant Ritterbusch and Associates said in a report.
Optimism over survey data from China and India indicating expansion in the manufacturing and services sectors helped allay concerns about demand in emerging markets, while crude prices also benefited from a weaker dollar, which makes the commodity cheaper — and a more attractive investment — for traders holding other currencies.
Investors will also be closely watching the latest U.S. economic results this week, especially the December jobs report scheduled to be released Friday.
Gasoline prices on Tuesday were at a national average of $3.28 per gallon — the highest level ever at the start of the year — and analysts say the average could again flirt with $4 per gallon by spring, if oil prices keep rising.
In other energy trading Tuesday, heating oil rose 12.4 cents, or 4.3 percent, to end the day at $3.0382 per gallon, while gasoline futures rose by 9.12 cents, or 3.4 percent, to finish at $2.7486 per gallon. Natural gas was virtually unchanged, ending at $2.9930 per 1,000 cubic feet.
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