Oil price up 9%, Iran sanctions backfire

Oil prices have risen more than 9 percent on concerns about the potential results of sanctions on Iran’s oil industry and the strong gains in world stock markets on the back of the recent European Union summit. The oil surge happened on Friday when heavy trading led to the fourth largest daily gain on record, Reuters reported. Light, sweet crude for August delivery finished 9.4 percent or $7.27 higher at $84.96 a barrel, which was the biggest one-day oil rise in percentage terms since March 2009. Oil owed its gains for the day to a wider market rally, with the euro and world stocks rising after eurozone leaders agreed to recapitalize regional banks. Data from the US Commodity Futures Trading Commission indicate that throughout the second quarter, hedge funds and other speculators had bet big on lower oil prices. "We had significant second-quarter trends that may all be in the process of reversing, including the risk-off trade triggered by the EU instability," Tim Evans, an energy analyst for Citi Futures Perspective, was quoted as saying. "What has changed today is the market sentiment, the fundamentals may evolve at a more glacial pace," he added. Iran's crude oil is subject to an EU embargo starting on July 1 that also bars EU insurance firms from covering Iran's exports.