Oil prices rose Monday after Greece took a key step away from a default on its huge debt that could hurt Europe’s economy and cut demand for oil.
Crude prices also got a boost from renewed tensions about Iran’s oil supplies after some shipping companies said they will stop loading Iranian crude onto tankers because of pending US and European sanctions against Iran.
Benchmark oil rose $1.82 to $100.49 per barrel in New York.
Brent crude, which is used to price many international varieties of oil, rose 55 cents to $117.30 per barrel in London.
Greek lawmakers over the weekend approved deep spending cuts needed for the country to get more bailout money and avoid default on its massive debt. European leaders will meet Wednesday to discuss giving Greece more funds.
Without a deal Greece faces a crippling bankruptcy that could affect the broader European economy. That in turn could slow demand for oil.
Investors were encouraged that Greece would get the bailout money it needs, but “it’s not like there is absolute certainty that everything is solved,” said Michael Lynch, president of Strategic Energy & Economic Research.
Meanwhile, several shipping companies have stopped taking on shipments of Iranian oil because of US and European sanctions that will start taking effect in a few months. The US and the E.U. want to deprive Iran of the oil income it needs to fund what they believe is a program to build nuclear weapons.
“The geopolitical risk premium may increase further this week given that several (oil tanker) operators are now purposely shunning Iran due to questions surrounding the validity of EU-based insurance in light of the sanctions,” said analysts at JBC Energy in Vienna. The EU embargo on Iranian crude also halts insurance on ships with an EU link that would carry Iran’s oil, effectively preventing them from hauling it.
JBC also estimated that Iran’s oil production has fallen by over 200,000 barrels a day since August due to the lack of maintenance and investment in Iran’s oil fields. Iran exports 3 percent of the world’s daily supply of oil, including about 500,000 barrels to Europe.
Evercore Partners shipping analyst Jonathan Chappell said he doesn’t believe the action by the shipping companies will have a significant impact on oil prices because Iran can sell more oil to India and China. “The Iranians do have their own fleet to move some of their oil and they also may just decide to store oil on ships if there is no end market,” he said.
In other energy trading, heating oil fell 2 cents to $3.16 per gallon, gasoline futures rose 2 cents to $3a gallon and natural gas fell 4 cents to $2.43 per 1,000 cubic feet.
At the pump, the national average for a gallon of gasoline in the US rose less than a penny on Monday to $3.51, according to AAA, Wright Express and the Oil Price Information Service. That’s 12 cents more than a month ago and 38 cents more than a year ago.