Oil Settles Higher After Choppy Trading Fuelled by Iran, Nigeria Concerns

U.S. crude oil futures ended a seesaw session up but below session highs on Monday as geopolitical tensions, especially Iran and its disputes over captive British military personnel and Tehran's nuclear program, kept support under already high-priced crude.

Prices were pared late after Ali Larijani, the secretary of Iran's Supreme National Security Council, said he believed the standoff over 15 British sailors being held by Iran could be
resolved without a trial.

"We had retracement off the Iran headlines but the rally higher was led by Brent crude," said Tom Bentz, analyst at BNP Paribas Commodity Futures.

On the New York Mercantile Exchange, May crude oil rose 7 cents, or 0.11%, to settle at $65.94 per barrel, trading from $65.08 to $66.69. Technical support was charted at $64 with resistance slated at $67.60.

In London, May Brent crude before settlement was up 82 cents, or 1.2%, at $68.92 a barrel, having traded from $67.48 to $69.58.

Crude futures rallied after the U.S. State Department said Monday a U.S. citizen, a former FBI agent, was reported missing in Iran.

"Every twitch is going to produce a reaction now," noted Mike Fitzpatrick, vice president for energy risk management at Fimat USA.

Iranian television showed new footage on Monday of 15 detained British naval personnel, saying they all had admitted to entering Iran illegally and Tehran saw a shift in British policy that could help resolve the standoff.

Talk of a shift in Britain's approach marked a softening in Iran's tone in the crisis in which tensions were already high because of Iran's nuclear standoff with the West.

Two expatriate workers were abducted in Nigeria's southern oil-producing Niger Delta, oil industry sources said Monday. That followed another expatriate abduction on Saturday during a raid on a drilling rig off Nigeria's coast.

Analysts attributed Brent crude's strength relative to West Texas Intermediate to the more immediate impact to Europe of Iranian and Nigerian oil disruptions and Canadian crude being brought into the United States PADD II, the location of the NYMEX delivery point of Cushing, Oklahoma.

Futures started out lower after workers at France's Fos-Lavera oil hub ended an 18-day strike on Saturday, just as the walkout threatened to shut down refineries and cause a regional fuel shortage.

Heating oil futures, despite the waning Northern Hemisphere winter, have been getting support from diesel demand, which was expected to pick up during the spring planting season after the U.S. corn plantings forecast was the strongest since 1944.

NYMEX May refined products contracts have taken over the front-month position after April contracts went off the board on Friday. U.S. gasoline and distillate inventories will again be in focus when fresh data arrives on Wednesday morning.

On Monday, NYMEX May RBOB gasoline fell 1.52 cents, or 0.74%, to settle at $2.0428 a gallon, trading from $2.0342 to $2.0709. Support was charted at $2.00, with resistance at $2.15.

NYMEX May heating oil fell 1.44 cents, or 0.77%, to settle at $1.8625 per gallon, trading from $1.8533 to $1.8840. Support was slated at $1.80. Resistance was charted at $1.90.

Fresh U.S. inventory data will be released by the government on Wednesday. A rebound in crude imports was expected to have left stocks higher last week, up 1.6 million barrels, according to the average of analyst views in a Reuters poll on Monday.

Distillate supply was expected to be down 600,000 barrels and gasoline down 800,000 barrels, with refinery use up 0.6 percentage point.

Oil traders have a short week to work in, as the NYMEX will be shut on Friday ahead of the Easter weekend and electronic trading will not resume until Sunday at 6 p.m. New York time.