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Oil climbs above $110; Iran in focus

LONDON - Oil rose above $110 a barrel on Tuesday as escalating tensions over Iran offset plentiful supplies and concern over the health of the global economy.

Washington cleared the way on Monday for tighter sanctions against Iran to curb its nuclear ambitions, while Tehran increased its rhetoric against Israel, heightening concerns about a potential conflict between the two.

Investors have been taking stock after a series of stimulus measures from central banks in the United States, Europe and Japan, and are coming to the view that the measures may not do much to boost growth in the economy.

“The oil market remains caught between supply risks and the prospect of fresh liquidity from the central banks on the one hand, and plentiful supply and growing economic concerns on the other,” said a Commerzbank research note.

“Until it decides which direction to take, the oil price is likely to continue to fluctuate with a sideways tendency that will depend on which factors happen to be more in focus.”

Brent futures rose 67 cents to $110.48 per barrel at 0924 GMT, after climbing to a high of $110.79 earlier in the session. US crude was up 71 cents to $92.64 a barrel.

New sanctions

The US government officially linked Iran’s state oil company to the country’s Islamic Revolutionary Guard Corps on Monday, allowing Washington to apply new sanctions on foreign banks dealing with the company.

The move could make Iran struggle to find ways to ship its oil to consumer nations, especially in Asia, where buyers are being deterred by a lack of European insurance cover.

Demand concerns

A faltering global economy and its negative effect on demand continues to weigh, especially after a survey on Monday showing German business sentiment dropped for a fifth straight month.

Germany’s relative resilience to the euro zone debt crisis has been weakening as firms see falling demand for their products from European partners and signs of a slowdown in other markets.

The market is also waiting for US inventory data for clues on demand from the world’s biggest consumer of oil. US crude oil stockpiles probably rose last week for the third straight week, while gasoline and distillate stockpiles were also seen higher, a preliminary Reuters poll showed on Monday.

The American Petroleum Institute will release its inventory report later in the day, while the EIA will issue its data on Wednesday.