Businesses braced for energy cost hikes as oil prices soar
Companies in Northern Ireland were bracing themselves for a ramp up in energy costs yesterday after the price of crude oil surged to a nine-month high.
A barrel of North Sea crude jumped $120 a barrel after Iran, which accounts for 11% of the world's supply, said it had halted exports to both the UK and France.
While the Middle Eastern region doesn't currently supply oil to the UK, the knock-on effects of the cut to France's importation of 75,000 barrels-a-day of Iranian oil - a relatively small amount - have prompted worries over the security of future supply.
The move has been seen as an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran's crucial fuel exports. They included a freeze of the country's central bank assets and an oil embargo set to begin in July.
Iran's oil minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to "hostile" European nations. The 27-nation EU accounts for about 18% of Iran's oil exports.
The EU sanctions along with other punitive measures imposed by the US are part of Western efforts to derail Iran's disputed nuclear programme, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its programme is for peaceful purposes.
Oil prices were also boosted by China's decision to increase money supply in a bid to spur lending and economic growth. China's central bank said on Saturday that it would lower the ratio of funds that banks must hold as reserves, a move that frees tens of billions of dollars.
The oil price also took support from hopes that Germany would sanction a bailout of Greece, a move which boosted the euro. A stronger euro makes dollar-denominated crude cost less to euro buyers.
Further gains could also be on the cards in the coming months.
Investment bank JP Morgan has raised its price forecast for Brent crude up to $135 a barrel on expectations the global economy may grow more strongly than first thought.
"Building economic momentum has the potential to pull oil prices higher for the next 12 to 24 months," JP Morgan said in a report.