| NEW YORK
NEW YORK Brent oil settled at an eight-month high on Wednesday as fears of supply disruptions from Iran producers and Africa outweighed worries about the global economy.
Crude markets found early support from an Iranian state media report, which was later denied by the oil ministry, that Tehran had banned oil exports to six European Union countries in retaliation for EU sanctions.
Threats of a potential loss of exports from the OPEC member over the West's standoff with Iran over its nuclear program have gripped oil markets for months, and added to bullish sentiment following disruptions in other producing countries.
An explosion hit a major oil pipeline feeding a refinery in Syria on Wednesday and a strike in Yemen has halted output at its largest oilfield. In addition, Sudan seized more of South Sudan's oil in a dispute over payment issues which has shut down the 350,000 barrel per day pumped by the new nation.
The news outweighed concerns about the euro zone crisis, which has kept markets on edge due to a potential impact on demand.
"The oil markets are doing a balancing act between what's happening in Iran and the euro zone, where the Greek bailout deal may still fall apart," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.
In London, ICE April Brent crude settled at $118.93 a barrel, gaining $1.58 and posting the highest close since June 14's close at $120.16. It climbed early to a session peak of $119.99, the highest intraday since August 1, on the report that Iran was halting oil exports to some EU countries.
U.S. March crude settled at $101.80 a barrel, gaining $1.06, the highest close since January 11. It hit an early peak of $102.54, the highest intraday since January 12.
April Brent's premium against its counterpart April U.S. crude narrowed to $16.79 at the close. The March/March gap stood at $17.42 on Tuesday, when March Brent expired.
Brent's total crude oil volume rose 19 percent above its 30-day average, Reuters data showed. U.S. crude volume was up 9 percent against its 30-day average.
Additional support came from U.S. data showing a surprise, drop of 171,000 barrels in the week to February 10 in crude oil stockpiles last week, defying the forecast in a Reuters poll for a 1.5 million-barrel increase.
Crude stocks held at the Cushing, Oklahoma, delivery hub for U.S.-traded crude oil futures rose to their highest level since September, posting a 2 million-barrel build, the biggest weekly increase since December 2009.
Euro zone crisis in graphics: r.reuters.com/hyb65p
Timeline on Sudan, S.Sudan: link.reuters.com/cex79r
EURO ZONE WORRIES, MIXED U.S. DATA
The market kept a close eye on a possible delay of parts or even all of the second international bailout for Greece while still avoiding a messy default was being discussed by euro zone officials.
The officials appeared unconvinced that Greece's political leaders were sufficiently committed to the bailout deal that requires Athens to make further spending cuts and adopt unpopular labor reforms.
U.S. economic data was mixed, with factory activity in New York state rising to its highest in 1-1/2 years this month and U.S. industrial production turning unexpectedly flat in January.
However, the United States posted its second month of gains in manufacturing last month, pointing to underlying strength in the economy.
Iran touted advances in nuclear know-how but at the same time sent a letter to EU's foreign policy chief expressing readiness "to hold new talks over its nuclear program in a constructive way." That sent mixed signals to the West, which fears Tehran's ultimate goal is to build atomic weapons.
Tehran has repeatedly denied that was its objective, but sanctions imposed by the U.S. against the Islamic Republic, and an action by the EU calling for a ban on Iranian oil by July 1 has prompted Iran to keep threatening to shut the vital Strait of Hormuz oil shipping lane, helping keep oil prices elevated.
"Although indications out of Iran regarding a pre-emptive cessation of crude exports to some European nations was followed by conflicting information, the Iran factor remains alive and well as a bullish influence to the crude market," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
(Additional reporting by Robert Gibbons in New York and Alex Lawler in London; Editing by David Gregorio, Dale Hudson and Lisa Shumaker)