Oil Prices Climb Amid Fresh Iran Tensions
Oil prices rose on Monday after the United States stepped up pressure on Iran over the Islamic Republic's threat to close the Strait of Hormuz -- a key shipping route for oil exports to the West.
Brent North Sea crude for delivery in February climbed 33 cents to $113.39 a barrel in early London deals.
New York's main contract, West Texas Intermediate for February gained eight cents to $101.64.
US Defense Secretary Leon Panetta on Sunday warned that the United States would respond if Iran tried to close the Strait of Hormuz, the waterway at the entrance to the Gulf -- insisting that such a move would cross a "red line."
Iran has threatened to close the passage should the West press ahead with a threatened embargo on its oil exports.
"We made very clear that the United States will not tolerate the blocking of the Straits of Hormuz," Panetta told CBS television. "That's another red line for us and that we will respond to them."
Panetta was seconded by General Martin Dempsey, the chairman of the Joint Chiefs of Staff, who said Iran has the means to close the waterway, through which 20 percent of the world's oil passes.
"But we would take action and reopen the Straits," the general said on the same show, "Face the Nation."
Their comments follow Iranian threats to close the strait if the European Union slaps an embargo on Iranian oil, the latest step in a U.S.-led campaign to pressure Tehran to give up their nuclear program.
Western powers suspect that Iran is bent on gaining atomic weapons, which Tehran denies.
The rising tensions have driven oil prices to eight-month highs above 100 dollars and sent jitters through the oil-rich Gulf amid growing fears of a spiral into conflict.
Helping to slightly offset concerns over Hormuz, the United Arab Emirates announced on Monday that a pipeline being built by the UAE to export oil from east coast terminals, avoiding the Strait, would be operational by June.
"The pipeline is almost complete. It will be operational within six months ... by May or June," UAE energy minister Mohammad bin Dhaen al-Hameli told reporters.
The Habshan-Fujairah pipeline will have the capacity to pump 1.5 million barrels per day of oil from fields in Abu Dhabi on the Gulf to Fujairah on the Gulf of Oman, Hameli said.
The UAE currently produces around 2.5 million bpd. Construction of the 360 kilometer (225 mile) pipeline began in 2008.
Hameli brushed aside questions about other measures the UAE might take to secure oil supplies in the event that Iran carries out its threat to close of the Strait of Hormuz, saying: "Who says Hormuz is going to close?"
The UAE is a smaller producer of oil compared with Iran.