Oil traded near the highest in eight weeks in London as speculation that sanctions against Iran will curb crude supplies countered concern that Europe's debt crisis will worsen and slow demand.
Brent swung between gains and losses after a two-day, 6.3 per cent increase. French Foreign Minister Alain Juppe said on Wednesday he hopes Europe will decide to embargo Iranian oil as part of sanctions against the country's nuclear programme. An import ban could send Brent crude to $125 a barrel, according to Societe Generale. Concern the European crisis will spread increased after Greece said deeper income cuts are the only way for the country to keep the euro and avert economic collapse.
"The prospect of sanctions is having an effect already on the outright price," said Alexander Poegl, an analyst at JBC Energy GmbH in Vienna. "The market has taken this into consideration. Europe made it clear in November that they're quite advanced with the proposals."
Brent oil for February settlement was down 13 cents, or 0.1 per cent, at $113.57 on the London-based ICE Futures Europe exchange as of 10.31am, after rising to $114.64 a barrel, the highest intraday level since November 14.
On the New York Mercantile Exchange, crude for February delivery was at $102.65, 57 cents lower, in electronic trading. Wednesday the contract climbed to $103.22, the highest close since May 10. Prices advanced 8.2 per cent in 2011, their third annual increase.