Oil prices diverge amid fresh Iran tensions

Oil prices diverged Monday as weak demand worries triggered by the eurozone debt crisis helped offset escalating tensions over Iran's supplies and unrest in crude producer Nigeria, analysts said. Brent North Sea crude for delivery in February climbed 14 cents to $113.20 a barrel in London afternoon deals. New York's main contract, West Texas Intermediate for February fell 28 cents to $101.28. "As the week gets underway, Brent has risen ... on the back of supply risks," said Commerzbank analyst Eugen Weinberg. "The nuclear dispute between the West and Iran is increasingly prompting money managers to pin their hopes on rising prices again." Markets were also reacting to a meeting between the leaders of Germany and France on managing the eurozone debt crisis. "Due to the lack of major US economic data, the main focus (for markets) will remain on the meeting ... that could provide some useful insight about the future of the eurozone," said Sucden Financial Research analyst Myrto Sokou. The eurozone crisis roared back into the picture on Monday as the euro struggled on the markets amid new signs of banking tensions amid a crunch meeting between the French and German leaders. Analysts were bracing for disappointment from the meeting in Berlin between German Chancellor Angela Merkel and French President Nicolas Sarkozy, with little concrete expected in the way of proposals. Across the Atlantic meanwhile, the United States on Sunday stepped up pressure on Iran over the Islamic Republic's threat to close the Strait of Hormuz -- a key shipping route for oil exports to the West. US Defense Secretary Leon Panetta warned that the United States would respond if Iran tried to close the Strait of Hormuz, the waterway at the entrance to the Gulf -- insisting that such a move would cross a "red line." Iran has threatened to close the passage should the West press ahead with a threatened embargo on its oil exports. "We made very clear that the United States will not tolerate the blocking of the Straits of Hormuz," Panetta told CBS television. "That's another red line for us and that we will respond to them." Panetta was seconded by General Martin Dempsey, the chairman of the Joint Chiefs of Staff, who said Iran has the means to close the waterway, through which 20 percent of the world's oil passes. "But we would take action and reopen the Straits," the general said on the same show, "Face the Nation." Their comments follow Iranian threats to close the strait if the European Union slaps an embargo on Iranian oil, the latest step in a US-led campaign to pressure Tehran to give up their nuclear programme. Western powers suspect that Iran is bent on gaining atomic weapons, which Tehran denies. The rising tensions have driven oil prices to eight-month highs above 100 dollars and sent jitters through the oil-rich Gulf amid growing fears of a spiral into conflict. Helping to slightly offset concerns over Hormuz, the United Arab Emirates announced on Monday that a pipeline being built by the UAE to export oil from east coast terminals, avoiding the Strait, would be operational by June. Meanwhile in Nigeria, another major oil exporter, police and protesters clashed in parts of the country on Monday as tens of thousands demonstrated nationwide over fuel price hikes, with at least eight people shot, one fatally.