New York - Oil prices continued to rise on Thursday, pushed up by tensions with Iran, a cold snap in Europe and rising demand from developing nations.
Brent crude rose $1.08 to $120.01 per barrel, and it is up 12 percent so far this year and 15 percent from a year ago. West Texas Intermediate, the US benchmark, rose 52 cents to $102.32 on Thursday. It is up 21 percent from a year ago.
The climb has been caused by fears that a military conflict will erupt in the Middle East and block oil supplies from reaching markets. The US and Europe are tightening economic sanctions against Iran over what the West believes is Iran's attempt to build a nuclear bomb. World leaders fear Israel may be planning a strike against Iran.
In response, Iran, which is the world's third largest exporter, has threatened to withhold its own oil deliveries and to block the Strait of Hormuz, through which one-fifth of the world's oil flows.
While neither scenario is likely, it has prompted traders to buy oil as protection against a possible shortage. Phil Flynn, an analyst at PFG Best, says the Middle East tensions have added $20 per barrel to the oil price.
Also, a severe cold snap has gripped Central Europe this year, increasing demand for heating oil and helping push Brent prices higher. That in turn contributes to high gasoline prices in the US, since many refineries use Brent to make gasoline. Gas prices are up about 25 cents this year.
A 25-cent jump in gasoline prices, if sustained over a year, would cost the US economy about $35-billion. That's only 0.2 percent of the total US economy, but economists say it's a meaningful amount, especially at a time when growth is so weak. The economy grew 2.8 percent in the fourth quarter, a rate considered modest following a recession.
Oil prices spiked at this time last year with uprisings in several Middle East nations, particularly Libya.
For the year, US retail gasoline averaged its highest price ever, $3.51 per gallon.
In other energy trading on Thursday, heating oil rose almost a penny to $3.20 per gallon and gasoline futures rose two cents to $3.02 per gallon.
Natural gas rose 12 cents, or 5 percent, to $2.55 per 1 000 cubic feet after the Energy Department reported the nation's gas supplies fell more than analysts expected last week.
At the pump, the national average for gasoline was unchanged at $3.52 a gallon. - Sapa-AP