Spurred by Iran Oil Rumors, Crude Prices Climb

Oil hit a six-month high above $119 a barrel on Wednesday after Iranian state TV said Iran stopped oil exports to six European states in retaliation for European Union sanctions imposed on the Islamic state, adding to supply concerns.

Iran has stopped exporting oil to Netherlands, Greece, France, Portugal, Spain and Italy, Iranian Press TV reported. The move follows a decision by the EU's 27 member states to stop importing crude from Iran from July 1.

Brent crude was up $1.83 at $119.18 a barrel at 1247 GMT, having traded as high as $119.99, the highest intra-day price since Aug. 1. U.S. crude rose $1.28 to $102.02.

"Bubbling of tensions with Iran will always be supportive of the oil price, and this latest development is no different," said Harry Tchilinguirian, analyst at BNP Paribas.

The Iranian news follows other supply issues that were supporting prices earlier on Wednesday.

An explosion hit a pipeline in Syria on Wednesday, a strike in Yemen has halted output at its largest oilfield and Sudan seized more of South Sudan's oil in a dispute over payment issues.

The supply risks far outweigh the effects of the euro zone's debt problems and will probably keep Brent above $110, said Jeremy Friesen, a commodity strategist at Societe Generale.

"The oil market continues to be caught between a deterioration in the global economy and supply issues, including actual supply disruptions in Sudan," he said. "I don't think it's realistic to expect that risks in the Middle East will disappear."

In a sign that the euro zone may succumb to a mild recession, figures on Wednesday showed Germany's economy contracted slightly in the last three months of the year while France eked out an anaemic level of growth.

Even so, the latest indications from the United States, suggest a firm foundation for an economic recovery. Later on Wednesday, the latest weekly U.S. oil supply report will be in focus.

The U.S. Energy Information Administration's inventory report is scheduled for release at 1530 GMT. Analysts expect crude oil stocks to rise by 1.5 million barrels.

In a precursor to the EIA report, oil industry group the American Petroleum Institute said on Tuesday crude stocks rose by a more-than-expected 2.9 million barrels.