Iran concerns push oil above $66

Analysts fear tensions with Iran will keep oil prices higher

Oil prices rose to new six month highs above $65 a barrel on fears of a clash between Western forces and Iran.

Light sweet crude jumped by $1.95 to settle at $66.03 in the US. In the UK Brent crude rose $2.10 to $67.88.

Iran, the fourth largest oil exporter, has been holding 15 British sailors since Friday, claiming they had been in Iranian waters.

Fresh UN sanctions were imposed against Iran on Saturday over the country's nuclear programme.

Broadcast

Iranian television on Wednesday displayed pictures of the British servicemen and featured an interview with the only woman crew member, Faye Turney, admitting they had "trespassed" into Iranian waters.

But the British government is concerned the sailors might have been coerced into appearing, and insists they were seized in Iraqi waters.

The incident has served to aggravate relations between the West and Iran, which have been deteriorating following disagreements regarding Iran's nuclear programme.

Iran says its nuclear programme is for civilian purposes only, while the US argues it is to develop nuclear weapons.

Disruption

Oil prices jumped by 8% to $68 a barrel - a six-month high - on Tuesday, on speculation that the West and Iran would come to blows militarily - something which was swiftly denied by the US.

So far, there has been no disruption to Iran's daily shipments of around 2.2 million barrels.

But analysts remain concerned that continued tension with Iran will have an impact on oil prices.

"Oil is trading on news and it is difficult to get any kind of a handle on," said Simon Denham, managing director of UK spreadbetting firm Capital Spreads.

"The world is split into two camps. One side who believe everything the US and UK say about the Gulf states and the other who disbelieve it.

"This week's spats will merely have bolstered both sides. If the current saga drifts to a close in the near future we can expect to see some sell-off in the forward oil contracts."