Brent ends above $101 on Iran sanctions, supply woes

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012.

NEW YORK (Reuters) - Brent crude futures climbed above $101 a barrel on Thursday, as the U.S. government's announcement that it was tightening sanctions against Iran sparked a rally back from early losses on global economic worries.

After Brent crude shifted higher, U.S. crude followed suit and U.S. gasoline futures shot up more than 1 percent, tracking global benchmark Brent futures, traders said.

Brent also got a late lift when traders reported that output of the North Sea Buzzard oilfield, the UK's largest oilfield, fell to as low as around 50,000 barrels per day (bpd) earlier this week, due to an unspecified problem. It was not clear if the output had recovered yet to the normal rate of 200,000 bpd.

The news followed a Reuters report on Wednesday that the combined daily loading volume of the four benchmark North Sea crude oil streams was expected to fall to record low in August, according to Reuters calculations.

The United States ratcheted up its sanctions against Iran, blacklisting a number of companies and individuals for contributing to what it said was an effort to acquire nuclear weapons. The U.S. Treasury said it had identified dozens of Iranian front companies, ships and banks that were helping Tehran evade Western sanctions.

In London, Brent crude futures for August delivery settled at $101.07 a barrel, up 84 cents. It shot up to a session high of $101.36 a barrel, moving toward its 50-day average of $101.86. In early trade, it fell to a session low of $98.51.

"It was the rally near the close, on the news about the Iran sanctions, that pulled prices up after falling on worries about the global economy," said Matt Smith, analyst at Summit Energy in Louisville, Kentucky.

"The news brings back to the fore tensions brought on by Iran's nuclear program," he added.

U.S. August crude settled 27 cents higher at $86.08, after earlier falling to a session low of $84.21. U.S. August gasoline settled up 3.73 cents at $2.8062 a gallon.

Brent's premium against U.S. crude rose 57 cents to $14.99.

Brent trading volume was near parity with its 30-day average, topping U.S. crude dealings, which were down 28 percent from its 30-day average, according to Reuters data.

IRAN TENSIONS

Earlier, Israel's Vice Minister, Moshe Yaalon, said the United States must do more to show Iran it is serious about curtailing its nuclear ambitions because the current pressure was not working.

It was the latest sign of tensions in the Middle East spawned by Iran's disputed nuclear program that has provoked the European Union to impose a ban on Iranian oil imports from the start of the month.

The United States has also imposed sanctions aimed at hampering Iran's ability to trade oil with its usual customers.

But traders said that, despite the EU ban, Iran had issued official selling prices for loading its crude oil in August.

GLOBAL GROWTH BLUES

Oil futures slumped to session lows after the International Energy Agency, adviser to 28 industrialized nations, said a global economic slowdown could put a lid on oil prices, although there was a risk that "nasty supply surprises" could reignited a market rally.

The agency said market fundamentals had "clearly eased since the start of the year" and that oil stocks had built up significantly over the last few months.

Oil pared losses after a report that new U.S. weekly jobless claims fell to the lowest level in four years, sparking hope for the struggling U.S. labor market.

But traders remained cautious about the global economy, awaiting release of China's second quarter economic growth data on Friday at 0200 GMT.

The world's second largest economy likely grew at its slowest pace in three years in the second quarter of 2012, with its GDP report set to confirm expectations of a downward trajectory that leavers full year growth on course to confirm its softest showing since 1999.

A Reuters poll forecast China's Q2 GDP growth at 7.6 percent from a year ago, its sixth straight quarter of easing growth.

STIMULUS HOPES LOWERED

On Wednesday, oil futures rallied more than 2 percent, lifted by momentum trading, despite disappointment that the U.S. Federal Reserve said it would take steps to further stimulate growth only if the economy worsened.

Also on Wednesday, EIA data showed U.S. crude inventories fell 4.7 million barrels last week, but the impact was limited as much of the drawdown was in the West Coast, which is not geographically linked to the rest of the U.S. petroleum regions. Furthermore, U.S. gasoline and distillate stocks rose much more than expected. <EIA/S}

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Euro zone crisis in graphics: r.reuters.com/hyb65p

For more stories on U.S. Fed policy, see: [FED/AHEAD>

24-hr Brent chart analysis

here

24-hr chart analysis onJ.S. oil:

here

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(Additional reporting by Robert Gibbons in New York, Jessica Donati and Ikuko Kurahone in London, Florence Tan and Manash Goswami in Singapore; Editing by David Gregorio and Marguerita Choy)