LONDON (Reuters) - Brent crude rose on Monday, briefly hitting an eight-month high above $121 a barrel, as Iran halted exports to British and French companies ahead of a European Union embargo.
Policy easing by China and hopes for a Greek bailout also buoyed prices.
Brent crude was trading 84 cents higher at $120.44 a barrel by 1230 GMT, having hit a session high of $121.15 earlier. The level was the highest since mid-June last year.
In euro terms, Brent crude is nearing its record high hit in summer 2008, according to Reuters data.
U.S. crude hit $105.44 a barrel, its highest since May last year and it was trading $1.76 up at $105.00 around the same time. Volume was moderate due to a public holiday in the United States.
OPEC’s second-largest producer, Iran, ordered a halt to its oil sales to British and French firms on Sunday in retaliation against tightening EU sanctions as its ties with the West remained strained over its disputed nuclear program.
But the announcement came as European oil buyers had already made big cuts in purchases from Iran months ahead of the sanctions.
“Banning the tiny quantities of exports to the UK and France involves very little risk for Iran - indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage,” said Caroline Bain, commodities analyst at the Economist Intelligence Unit.
Fears of supply disruption in Iran and upbeat economic data from the world’s largest oil user, the United States, have pushed oil prices up over the past month.
J.P. Morgan Chase (JPM.N) raised its 2012 price forecast for Brent crude by $6 to $118 a barrel on supply risks and rising economic growth. It also raised its forecast for 2013 to $125 a barrel, up from $121.
Geopolitical issues in Iran, Syria, Sudan/South Sudan, Nigeria and elsewhere are creating increased demand for crude stocks, analysts led by Lawrence Eagles said in a February 19 note.
Speculators sharply raised their net long positions in the week to February 14, data from the U.S. Commodity Futures Trading Commission showed on Friday.
Investors’ appetite for riskier assets rose after China’s central bank on Saturday cut the required reserve ratio (RRR) of banks, boosting lending capacity by more than $50 billion and supporting demand outlook for commodities from the world’s second-largest economy.
“The RRR cut will most likely result in an acceleration of economic activity and that China’s first-quarter growth is likely to surprise us on the upside,” ANZ analysts wrote in a note.
Expectations Greece would secure a debt bailout this week also supported oil prices.
Euro zone finance ministers are expected to approve a second rescue package for Greece at a meeting on Monday, a move that will hopefully put the country on a more stable financial footing and keep it inside the single currency region.
Market analysts expect the outage to lift gasoline prices on the U.S. West Coast in the coming weeks.
Additional reporting by Florence Tan in Singapore and Christopher Johnson in London; Editing by James Jukwey and Alison Birrane