Oil prices rose on Monday after the European Union agreed to ban imports of Iranian crude from July, Tehran threatened again to close the Strait of Hormuz shipping channel, and on additional support from the weak dollar.
While deciding to ban new contracts to import, buy or transport Iranian crude and to freeze assets of Iran's central bank, EU foreign ministers agreed to phase in the oil embargo, allowing countries with existing contracts until July 1 to end those deals.
A senior member of Iran's parliament said Iran would close the Strait of Hormuz if sanctions block oil exports, reiterating previous threats and helping boost crude prices.
A day earlier, the aircraft carrier USS Abraham Lincoln sailed through the Strait of Hormuz and into the Gulf without incident.
"In spite of the delay to full implementation, prices have moved higher," said Christopher Bellew, a trader at Jefferies Bache. "It may never be fully implemented. Heaven knows what will happen between now and the first of July."
The dollar index weakened, supportive to dollar-denominated oil prices, and the euro traded at a near three-week high against the greenback.
The dollar fell to a near five-week low against the Swiss franc and traders cited caution ahead of the US Federal Reserve's two-day meeting that starts Tuesday.
Continued monetary easing or additional Fed actions to stimulate economic growth could further weaken the dollar and increase liquidity in oil markets.
Brent March crude rose 72 cents to settle at $110.58 a barrel, having reached $111.36 intraday but unable to threaten front-month Brent's 200-day moving average of $112.19.
US March crude rose $1.25 to settle at $99.58 a barrel, ending a string of three-straight lower closes and closing above the front-month 50-day moving average of $99.13 after reaching $100.24 intraday.
Total crude trading volumes were light. Volume for both Brent and U.S. crude was 26 percent below their 30-day averages.
US heating oil futures gained more than 2 cents, but gasoline settled slightly lower, after posting a 5-cent weekly gain last week after news that the Hovensa LLC refinery in St. Croix would shut mid-February.
"Within the product markets, the heating oil has been capturing some lost value against RBOB futures subsequent to last week's Hovensa headlines," Jim Ritterbusch, president at Ritterbusch & Associates said in a note.
Ahead of weekly reports on US oil inventories, US crude and gasoline stocks were expected to have risen last week, with distillate stockpiles expected to be near flat, according to a Reuters survey of analysts.
While the EU moved to ramp up pressure on Iran by phasing out oil imports, India wants to take as much Iranian oil as it can because terms are "favorable," Oil Minister S. Jaipal Reddy said.
Reddy's comments came after talks between the two sides last week on payment options for $12 billion of crude a year.
Russia expressed "regret and alarm" over the EU oil ban, saying Tehran will not make concessions about its nuclear program because of increased pressure from the West.
Israeli Prime Minister Benjamin Netanyahu praised the EU decision.
The United States applauded the EU agreement and said the US, along with its international partners, was committed to preventing Tehran from acquiring nuclear weapons.
Follow Emirates 24|7 on Google News.