Oil Prices Rally to November Peaks on Iran Tensions
World oil prices hit their highest levels since November on Wednesday, before pulling lower, as traders fretted over heightened tensions between key crude producer Iran and the United States, analysts said.
The market also won solid support from a stream of positive economic data which boosted the outlook for the global economy and energy demand.
In early morning deals, Brent North Sea crude for delivery in February jumped to $112.59 per barrel -- which was the highest level since November 15. It later stood at $111.58, down 55 cents from Tuesday's closing level.
New York's West Texas Intermediate (WTI) for delivery in February, spiked to $103.15, reaching a point last touched in November 17. The contract later changed hands at $102.30, which was 66 cents lower than Tuesday.
Oil had rocketed on Tuesday, underpinned by positive U.S., Chinese and Eurozone economic data, and deepening worries over Iran. The WTI contract leapt by $4.13 and Brent surged $4.75 per barrel.
"There has been a little bit of slowing across commodities after the (sharp) rise yesterday. But the situation with Iran remains worrisome," Nick Trevethan, senior commodities strategist at ANZ Research, said on Wednesday.
"The consequences of any military action in the Middle East will be enormous. A spike in crude prices will kill off any recovery in the US," he added.
A military confrontation between the United States and Iran could see crude oil prices hit the $200 mark, Trevathan told AFP.
Iran has threatened to choke off shipping or go after American naval ships if Western governments implement the latest round of punitive sanctions over its nuclear program.
Its military on Tuesday warned that it would not allow a U.S. aircraft carrier to return through the Strait of Hormuz -- a vital waterway in the Middle East through which 20 percent of the world's oil is transported.
Iran's defense minister added on Wednesday that his country "will do anything to preserve the security of the Strait of Hormuz" at the entrance to the Gulf.
"The presence of forces from beyond the (Gulf) region has no result but turbulence. We have said the presence of forces from beyond the region in the Persian Gulf is not needed and is harmful," Defense Minister Ahmad Vahidi said, according to the website of Iran's state television.
The United States has insisted that it has no plans to pull warships from the region and has dismissed Tehran's threats as those of a weakened, isolated regime.
"Oil is ... finding support from the continuing tensions between Iran and the United States, as sabre-rattling is stepped up on both sides," said Commerzbank analyst Eugen Weinberg.