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Oil steady around $120 on Iran worries, Greek optimism

Oil steadied near $120 a barrel today, supported by tension between Iran and the West and hopes for a long-awaited Greek bailout deal.

business Updated: Feb 17, 2012 19:35 IST

Oil steadied near $120 a barrel on Friday, supported by tension between Iran and the West and hopes for a long-awaited Greek bailout deal.

"As long as there are serious concerns about supply shortfalls and while optimism continues on the financial markets, the oil price is likely to continue to rise, especially since even investors with a short-term view will no doubt want to jump on the bandwagon now that the $120 mark has been exceeded," said Carsten Fritsch, analyst at Commerzbank.

Oil has turned in a star performance this week: US crude is heading for its biggest weekly gain since late December and Brent is targeting its fourth consecutive weekly rise.

North Sea Brent slipped 15 cents to $119.96 by 1324 GMT, having climbed to an eight-month high of more than $120. US crude rose 47 cents to $102.78.

Iran's top oil customers in Europe are making substantial cuts in imports ahead of European Union sanctions, reducing flows to the continent in March by more than a third, industry sources said.

This has increased demand for replacement barrels from Saudi Arabia, Iraq and Russia, leading to higher prices, although there is no shortage of actual supply.

Growing optimism that Greece has finally done enough to secure a second bailout after it set out extra budget savings also boosted sentiment.

Euro zone finance ministers are due to meet on Monday, and expectations that they will sign off a bailout deal for Greece increased after a proposal was dropped to withhold part of the agreement until after Greek elections expected in April.

"The Europe financial meeting on Monday is going to be the key driver in oil prices," said Ken Hasegawa, a commodity derivatives manager with Newedge Brokerage in Tokyo.

Prices were also supported by more evidence of sustained recovery momentum in the US economy.

US data on Thursday showed jobless claims falling to a near four-year low, solid growth in factory activity in the Mid-Atlantic area and a faster-than-expected rise in housing starts.

First Published: Feb 17, 2012 19:32 IST