Oil rose above $123 a barrel on Thursday, bouncing from sharp falls in the previous two sessions, on growing concerns over Iranian oil supplies being disrupted due to Western sanctions.
In a move that could lead to a near standstill to Iran’s crude oil exports ahead of its European Union ban from July 1, a major Chinese ship insurer will halt indemnity cover for tankers carrying Iranian oil from the month.
Brent crude oil futures rose $1.03 to $123.37 a barrel by 0825 GMT. US.gained 82 cents to $102.29, after falling $2.54 in the previous session.
Volume was moderate for both contracts ahead of public holidays in Europe and the United States.
Oil had fallen by more than $3 over the last two sessions due to the drop in the global stock market, a sharp increase in US oil inventories and fading expectations for more monetary stimulus from the US central bank.
“The stock market and oil both moved lower yesterday. Oil is recovering because of geopolitical risk over the long weekend,” said Christopher Bellew, broker with Jefferies Bache.
Explosions shut on Thursday both of the two pipelines bringing crude from Kirkuk in Iraq to the Turkish port of Ceyhan on the Mediterranean, a Turkish energy official said.
It was not immediately clear what had caused Thursday’s blasts but sabotage is common on oil and gas pipelines leading into Turkey from Iran and Iraq, where Kurdish separatist militants operate.
China is the top buyer of Iranian crude and the insurance move is the first sign Chinese refiners may struggle to obtain the shipping and insurance to keep importing from OPEC’s second-biggest producer.
This comes days after industry sources told Reuters Japanese refiners planned to cut crude imports from Tehran yet again in April as they shy away from renewing annual contracts.
Analysts also pointed out technical charts showed a floor for Brent oil of around $121.50-$122.50 level since March.
Later in the day, the market’s focus will shift to jobs data from the United States, the world’s second largest energy consumer after China.
The key jobs report for March from the US Labor Department is expected to show a gain of 203,000 jobs, including a rise in private payrolls of 218,000.
Prices were also supported by fresh signs of a recovery in the US economy and easing fears of a sharp slowdown in China.
A report showing US businesses added 209,000 jobs in March slightly beat expectations and raised hopes for a positive non-farm payrolls report last Friday.
Sentiment over China’s economic prospects also strengthened after the services sector expanded again in March and business confidence hit an 11-month high, though overall activity remained below its long-term average, a private sector survey of purchasing managers said on Thursday.