Oil held close to $120 a barrel on Tuesday as Iran's top customers in Asia moved to cut back on supplies due to tighter sanctions by the West.
Cuts in Asia are in addition to voluntary cutbacks by Iran's clients in Europe ahead of a July 1 European Union ban on Tehran's oil. As a result, Iran could be forced to re-route up to 500,000 barrels per day from March, trading sources say.
Benchmark Brent was up 18 cents to $120.23 by 16:51 SA time. US crude was at $104.50, up $1.26, after touching $105.44 on Monday, its highest since May 5.
The loss of some global supply, a recovering US economy and China's easing policy to support growth have lifted oil and stoked investor appetite for riskier assets.
And oil's rally is unlikely to lose steam as Western sanctions bite into supply from Iran, OPEC's second-largest producer.
Lifters of Iran's crude in Asia plan to cut imports as tighter US sanctions make it difficult for them to keep doing business with the Islamic Republic. Top buyers China, India and Japan are lining up cuts of at least 10 percent in Iranian crude imports.
On Sunday, Iran announced a retaliatory halt in oil sales to French and British companies, a largely symbolic step as exports to the two countries were already greatly reduced.
“Sabre-rattling on the part of Iran is continuing to lend support to the price ... which 'punishes' all EU countries for their boycott decision,” said Carsten Fritsch of Commerzbank. The euro oil price is just below its mid-2008 record high, he said.
Iran kept up the pressure on Tuesday, saying it might stop exporting to European countries that have not clarified their position on oil imports. - Reuters