Oil rose more than 1 per cent and topped $80 a barrel today, amid threats by Iran that it could cut off energy supplies to Europe, although prices later eased on worries about slowing demand in China.
A senior military official from Iran, the world's fourth-largest exporter of crude, said on Sunday the country could make European countries suffer by cutting off energy supplies and could target any adversary with its missiles.
US crude for April delivery rose 55 cents to $80.21, after having risen by as much as 95 cents. The contract settled Friday up $1.49 at $79.66 and posted its biggest monthly percentage gain since May 2009.
London Brent crude rose 53 cents to $78.12.
Iran is locked in dispute with the United States and its allies over its nuclear energy programme, which Western countries fear is aimed at allowing Iran the chance to develop nuclear weapons. Tehran says it is only interested in electricity.
However, oil prices pared early gains after data showed the pace of manufacturing in China, the world's second-largest fuel consumer, slowed more sharply than expected last month. Output and new orders continued to expand but the growth of export orders fell, an official survey of Chinese purchasing managers showed on Monday.
Positive economic data on Friday from the United States, which saw the world's largest economy grow faster than initially thought at 5.9 per cent versus 5.7 per cent in the fourth quarter, also helped increase investors' appetite for more risky assets, lending further support to oil.
Separately, Chile's state energy company ENAP said it was stepping up diesel imports after two of its oil refineries were damaged by a powerful 8.8-magnittude earthquake on Saturday. But analysts said the higher imports would have limited impact on crude prices.
Oil traders are set to take their cue from a raft of economic reports due this week, with key focus on USjobless data, due on Friday, which will give more clues on consumer spending. Other key economic indicators due include US manufacturing today and home loans on Wednesday.
More news on Greece's debt problems could also fire up investors, analysts said.
Greece may soon announce new steps to cut its budget deficit, a government minister said yesterday, amid signs that Athens might be nearing a deal with European Union governments to ease the Greek debt crisis.
Reuters