Oil prices jump to near six-month high

LONDON: Oil prices jumped to near six-month highs on Tuesday as the United States tightened sanctions on Iran, sending shares of energy companies higher but largely failing to help the currencies of the main crude-oil producers.

News that the US had told buyers of Iranian oil to stop purchases by May 1 or face sanctions pushed Brent towards $75 a barrel and made for a lively return from the four-day Easter break for Europe’s markets.

Oil and gas shares jumped more than 1.7 per cent for their best start in six weeks, though almost every other sector suffered. So did bonds, as higher energy costs hung over profits and nudged up inflation expectations.

Foreign-exchange market volatility was still largely absent. The dollar held near a three-week high, but the usual beneficiaries of higher oil prices, the Canadian dollar and Norwegian crown, dipped to $1.33 and $8.52 respectively.

“Oil is interesting, but the interesting thing for FX is that we are not getting the usual feed-through in the petrocurrencies,” said Saxo bank’s head of FX strategy, John Hardy, adding that might be caused by questions about Chinese stimulus.

Both the Canadian dollar and the crown had gained on Monday, and the Russian rouble, another petrocurrency, hit its highest against the euro in more than a year its highest against the dollar in a month.

Overnight, MSCI’s index of Asia-Pacific shares ended 0.1 per cent higher and Japan’s Nikkei closed up 0.2 per cent. Oil and gas gains were offset by losses for airlines and other transport shares facing higher fuel costs.

The White House said after its Iran move it was working to ensure oil markets were “adequately supplied,” but traders had already been worried about tight supplies.

Oil prices are up nearly 50 per cent since late December, and before the re-imposition of sanctions last year Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (Opec), at around 3 million barrels of oil per day. — Reuters