Oil prices rose to near US$100 a barrel yesterday as the Turkish incursion into northern Iraq and warnings by Tehran against further sanctions heightened concerns over potential crude supply disruptions.
Crude futures were supported by Turkey's ongoing cross-border ground operation against Kurdish rebels in Iraq.
Thirty-three rebels were killed in Sunday's fighting, bringing the rebel death toll since Thursday to 112, Turkey's military has said.
"The market perception is that [the incursion] could threaten the supply of crude from northern Iraq," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
The incursion is the first confirmed Turkish military ground operation in Iraq since the US-led invasion that toppled former Iraqi president Saddam Hussein in 2003.
Turkey serves as an oil and gas transportation hub, and Iraq is a major crude supplier to Europe.
Light, sweet crude for April delivery rose US$0.35 to US$99.16 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. It had climbed as high as US$99.70 a barrel earlier in the electronic session.
On Friday, the contract settled US$0.58, or 0.6 percent, higher at US$98.81 a barrel.
In London, Brent crude rose US$0.23 to US$97.24 a barrel on the ICE Futures exchange.
Some analysts noted a concentration of long positions -- speculating that prices will rise -- in the hand "of a few market makers," which could cause rising volatility.
"Apart from speculative funds pursuing technical targets, we find that the overall picture still fails to properly define the rationale for the continuation of the rally to new record highs," said Olivier Jakob, of Petromatrix in Switzerland.
Also driving prices higher was a threat by Iranian President Mahmoud Ahmadinejad on Saturday that Tehran would take unspecified "decisive reciprocal measures" against any country that imposed additional sanctions against his country.
Ahmadinejad's warning followed the release on Friday of an International Atomic Energy Agency (IAEA) report that said many past questions about Iran's nuclear program had been resolved, but highlighted Tehran's continued refusal to halt uranium enrichment, paving the way for the next set of sanctions.
Iran is already under two sets of UN Security Council sanctions for refusing to suspend uranium enrichment. The five permanent members of the Security Council and Germany have agreed on a draft resolution for a third set of sanctions.
"The IAEA's latest report last week on Iran again turned a focus on Iran's nuclear program which raises questions about sanctions, and that has in turn added to the mix that has left oil prices higher," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
Tehran insists its program is intended only to produce energy, but the US and some of its allies suspect it could lead to weapons development.
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