Oil climbs above $110 on pipeline explosion report denied by Saudis

Oil climbed above $110 a barrel for the first time since May after an Iranian state-run news channel reported an explosion on a pipeline in Saudi Arabia. A Saudi official said no oil facilities were sabotaged.

Futures reached $110.55 in New York on Thursday afternoon after Iran’s Press TV reported on its English-language Web site that “an explosion has hit oil pipelines in the flashpoint Saudi Arabian city of Awwamiya,” then fell back below $109. Maj. Gen. Mansour al-Turki, a spokesman for the Saudi Interior Ministry, said no oil facility in the region had been sabotaged after reports of a fire near the Ras Tanura refinery.

A fire occurred in an industrial area in the town of Safwa near Ras Tanura, Saudi Arabia’s largest refinery, according to a person with knowledge of the situation. The blaze didn’t damage the refinery or any pipeline in the area, according to two people familiar with the situation.

“It looks like it’s a rumor, but it shows you how sensitive the oil market is to any kind of supply constraint,” said Phil Streible, a Chicago-based commodities broker at RJO Futures.

Crude oil for April delivery rose $1.77, to settle at $108.84 a barrel, on the Nymex before the Press TV report. The price was $108.73 after 5 p.m. Futures settled at a nine-month high of $109.77 on Feb. 24.

Brent oil for April settlement climbed $3.54, or 2.9 percent, to a 10-month high of $126.20 a barrel on the London-based ICE Futures Europe exchange. Brent rose as high as $128.40 after the settlement and dropped back to $126.15.

Clashes between Saudi police and armed Shiite protesters in Awwamiya and al-Qatif, both cities in the oil-producing eastern region, have intensified since October, when 11 police officers were injured in an attack. Saudi authorities accuse Iran of stirring the unrest. The protesters have cultural and family ties with Shiite-led Iran. Saudi Arabia’s royal family is Sunni.

Futures in New York rose 1.7 percent in regular trading as U.S. officials escalated warnings that the nation may join Israel in attacking Iran to stop the development of nuclear weapons and on economic reports signaling growth.

“The next few days could be very important as far as Iran is concerned,” said Matthew Dougherty, a managing director at Advisory Research in Chicago. “The labor market is improving, and we’re starting to see some sparkles of hope in the housing market. These two sectors have been weighing on the economy for the last several years.”

Top 5 oil producers: Iran and these four other countries are the world’s biggest oil producers, according to 2010 data from the U.S. Energy Information Administration.

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