Brent crude rose above $114 per barrel to a more than three-month high today on renewed fears of supply disruption as Israel's latest comments on stopping Iran from proceeding with a disputed nuclear programme stoked tension in the region.
Israeli prime minister Benjamin Netanyahu said yesterday that most threats to Israel's security were "dwarfed" by the prospect of Iran obtaining nuclear weaponry.
Those comments overshadowed recent forecasts of a further slowdown in oil demand growth due to a weak economic outlook in the United States and Europe.
Brent crude rose $1.02 to $113.97 a barrel this morning, gaining for six out of the past seven sessions. It hit $114.28 earlier in the session - its highest point since May 4th.
US oil rose 73 cents to $93.60, after settling 49 cents lower at $92.87.
"We are seeing prices rise despite weak growth outlook numbers on Friday," said Ben Le Brun, a Sydney-based market analyst at OptionsXpress. "The Israeli comments, what you see in Israeli media, is a concern. A major concern."
The debate in Israel whether to go to war against Iran over its nuclear programme intensified during the weekend, worrying oil investors who see it as defying appeals by US president Barack Obama to allow more time for international diplomacy.
A decline in North Sea crude output is also supporting Brent. Output from 11 production streams is set to fall by 17 per cent in September due to maintenance and natural decline.
"An escalation in geopolitical risks in the Middle East and supply disruption risks from the North Sea has been supporting Brent," analysts at ANZ said in a research report.
Gains were capped after the International Energy Agency (IEA) said on Friday oil demand will rise more slowly than expected in China, Europe and the United States next year as economic growth falters.
The West's energy watchdog cut its estimates of oil use worldwide for several years, trimming the 2013 demand forecast by 400,000 barrels per day (bpd) in the light of a "worrying slowdown" in global economic activity.
Much of this decline is due to a deceleration in growth in the world's second-largest economy China, which will consume much less oil this year and next, the IEA said.
China's imports of crude oil sank in July to a nine-month low as refineries cut output due to low demand.
