Oil prices rise as EU agrees to Iran embargo

Oil prices rose on Monday after the European Union agreed to slap an embargo against Iran’s crude exports, in a move aimed at stopping the key oil producer from funding its disputed nuclear programme.

Brent North Sea crude for delivery in March climbed 77 cents to $110.63 a barrel in London midday deals after the widely-expected move by the EU.

New York’s main contract, West Texas Intermediate crude for March, won 88 cents to $99.21 a barrel.

British Foreign Secretary William Hague said an informal decision to impose the sanctions "is absolutely right to do this in view of Iran’s continued breach of UN Security Council resolutions and refusal to come to meaningful negotiations on the nuclear programme."

The embargo is to be formally approved by EU foreign ministers at a meeting on Monday.

"EU foreign ministers today will decide to (formally) impose an oil embargo on Iran," said Commerzbank analyst Carsten Fritsch.

"That said, the import ban is unlikely to happen overnight but will be implemented gradually over a period of several months, which should dampen its inflationary effect on the oil price."

The embargo provides for an immediate ban on importing Iranian crude and a gradual phase-out of existing contracts between now and July 1, according to the diplomat.

Tehran insists its nuclear programme is exclusively for peaceful, civilian use.

Meanwhile Greece’s dependence on Iranian oil had been holding up an accord on the timing and conditions of the embargo as the financially strapped nation relies on Iran for more than a third of its crude.

Iran sells about one-fifth of its crude to EU nations, with Greece, Spain and Italy the top buyers.

"With a daily import volume of 450 thousand barrels and accounting for nearly 20 percent of total Iranian oil exports, the EU is the second-largest customer of Iranian oil," Fritsch added.

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