The price of oil rose slightly to above $91 a barrel Tuesday amid concerns that tensions over Iran’s nuclear program could escalate as sanctions tighten this summer.
By early afternoon in Europe, benchmark oil for July delivery was up 38 cents to $91.24 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents at $90.86 on Friday, the last day it settled in New York. Markets were closed in the U.S. on Monday for the Memorial Day holiday.
In London, Brent crude for July delivery was down 13 cents at $106.98 per barrel on the ICE Futures exchange.
Crude has dropped from $106 four weeks ago amid signs of slowing global growth and optimism that a military conflict over Iran’s nuclear capabilities could be avoided.
Last week, negotiators from Iran and six world powers met for a second round of meetings and agreed to talk again next month.
However, sanctions by the U.S. and Europe aimed at limiting Iran’s oil exports are scheduled to tighten in July, and reports that Iran is continuing to enrich uranium — a key component to building a nuclear weapon — have traders nervous.
“The market undoubtedly found support based on Iran’s ability to string the West along,” energy trader and consultant The Schork Group said in a report.
The U.S. and Israel have said they will not accept Iran developing nuclear weapons. Iran says it is developing nuclear power for peaceful purposes.
“The oil market remains firmly in the grip of external factors,” said analysts at Commerzbank in Frankfurt. “There are risks on both the supply and the demand side, which more or less balance each other out.”
Commerzbank listed three key events, all in mid-June, which could give the market renewed direction — OPEC’s meeting in Vienna, talks on Iran’s nuclear program and elections in Greece.
On Monday, uncertainty in financial markets in Europe also helped limit oil price gains. Spain’s stock market slumped while borrowing costs rose on concern over the bailout of nationalized lender Bankia. Spanish Prime Minister Mariano Rajoy said the country’s banking sector would not need an international rescue, but the uncertainty has been weighing on financial markets.
Those concerns have likewise weakened the euro, which has helped pull oil prices down in recent weeks. A stronger dollar makes commodities priced in dollars, such as crude, more expensive to investors with other currencies. The euro was down slightly at $1.2524 on Tuesday.
“Should the euro weaken further, we will look for oil prices to fall as low as $84.94,” The Schork Group said.
In other energy trading, heating oil was up 0.48 cent at $2.8377 per gallon and gasoline futures added 1.25 cents at $2.8442 per gallon. Natural gas fell 4.9 cents at $2.578 per 1,000 cubic feet.