Oil up as EU embargoes Iran oil; natural gas soars

NEW YORK (AP) — Oil prices climbed near $100 per barrel as Iran again threatened to block shipments of crude from the Persian Gulf. The latest threat follows a widely expected decision by the European Union to embargo imports of Iranian oil.

Monday also featured a sharp turnaround in natural gas prices. Futures rose more than 7 percent after one of America's biggest natural gas producers said it would cut production this year.

Tanker traffic out of the Persian Gulf has concerned oil traders for weeks, with Iran saying it could close the strategic Strait of Hormuz, through which a fifth of the world's crude is transported, in response to sanctions by the West.

On Monday, the EU said its refineries will stop buying Iranian crude after July. It also froze assets of Iran's central bank. The sanctions are meant to force Iran to talk with the West about its nuclear program. Iran says its nuclear program is peaceful, but Western nations suspect it is trying to build nuclear weapons.

The embargo itself isn't expected to affect world supplies, although markets would get reshuffled. Analysts say China, which is one of the biggest buyers of Iranian crude, probably will buy more Iranian oil at below-market prices when the embargo begins. China would reduce imports from other oil-producing countries, which would then sell more to Europe.

"Iran needs to sell its oil to someone," independent analyst and trader Stephen Schork said. "Outside the West, Iran really has only one buyer: China. That means China's probably going to get some sweetheart deals.

Experts say Iran doesn't have the firepower to close off the strait, which is the only way to get from the Persian Gulf to the open sea. But a conflict there could clog the waterway with military vessels and force the world's refineries to wait for crucial oil shipments.

Benchmark crude rose by $1.25 to end the day at $99.58 per barrel in New York. Brent crude, which is used to price foreign oils that are imported by U.S. refineries, rose by 72 cents to finish at $110.58 per barrel in London.

In the U.S., natural gas prices jumped when Chesapeake Energy said it will cut production and exploration because of cheap prices and a massive buildup in supplies. Natural gas production has been surging in the U.S. thanks to new techniques that have helped the industry aggressively drill into underground shale deposits beneath a number of states.

Last week, the price of natural gas dropped to the lowest wintertime level since 2002. The Chesapeake announcement sent futures prices higher by 18.2 cents, or 7.8 percent, to $2.525 per 1,000 cubic feet.

At the pump, the national average for a gallon of gasoline stayed at $3.38, according to AAA, Wright Express and Oil Price Information Service. That's nearly 16 cents higher than it was a month ago and up 27 cents from a year ago.

In other energy trading, heating oil rose by 2.14 cents to end at $3.0098 per gallon while gasoline futures fell by about a penny to finish at $2.7779 per gallon.