BANGKOK: Oil inched toward $100 a barrel after Iran threatened to block shipments of crude from the Persian Gulf in the wake of the European Union's widely expected decision to embargo imports of Iranian oil.
Benchmark oil for March delivery was up 39 cents at $99.98 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract rose $1.25 to settle at $99.58 a barrel in New York on Monday.
Brent crude was down 13 cents at $110.45 on the ICE futures exchange in London.
Tanker traffic out of the Persian Gulf has concerned oil traders for weeks, with Iran saying it could close the strategic Strait of Hormuz, through which a fifth of the world's crude is transported, in response to sanctions by the West.
On Monday, the EU said its refineries will stop buying Iranian crude after July. It also froze assets of Iran's central bank. The sanctions are meant to force Iran to talk with the West about its nuclear program. Iran says its nuclear program is peaceful, but Western nations suspect it is trying to build nuclear weapons.
The embargo itself isn't expected to affect world supplies, although markets would get reshuffled. Analysts say China, which is one of the biggest buyers of Iranian crude, probably will buy more Iranian oil at below-market prices when the embargo begins. China would reduce imports from other oil-producing countries, which would then sell more to Europe.
"Iran needs to sell its oil to someone," independent analyst and trader Stephen Schork said. "Outside the West, Iran really has only one buyer: China. That means China's probably going to get some sweetheart deals."
Experts say Iran doesn't have the firepower to close off the strait, which is the only way to get from the Persian Gulf to the open sea. But a conflict there could clog the waterway with military vessels and force the world's refineries to wait for crucial oil shipments.
In other energy trading, heating oil rose 1.4 cents to $3.02 a gallon and gasoline futures added 0.7 cent to $2.79 a gallon. Natural gas futures were up 5.7 cents at $2.58 per 1,000 cubic feet.