The price of oil advanced on Monday amid remarks from oil-rich Iran stating markets will be irreparably impacted by crude's flow being disrupted through the Strait of Hormuz, according to Bloomberg.
After a week that saw the energy commodity drop 2.8 percent, oil futures increased 1 percent. Iran, believed by western nations to be pursuing a nuclear weapons program, is responding to threats of international sanctions by stating it will close the strategic waterway that sees roughly 20 percent of the globe's oil pass through it.
The Middle Eastern nation's governor to the Organization of the Petroleum Exporting Countries said global crude markets will be damaged by a disruption of supplies, the state news agency reported, according to Bloomberg. Labor unions in Nigeria called off demonstrations after noting the possibility of blocking the output of oil to resist increased prices of fuel.
"Supply worries in Iran and Nigeria combined with the recovering U.S. economy and demand from developing markets are driving oil prices higher," senior broker Christopher Bellew with Jefferies Bache in London told the news service. "It's only the weakness of the euro that's stopping oil from making bigger advances."
Production of the energy commodity from OPEC increased the most since October 2008, according to a report from the organization's secretariat in Vienna. The organization did note that the sovereign debt crisis tearing through euro zone banks, markets and public finance systems is likely to push down global consumption of the energy commodity.
Dow Jones Newswires reports trading of the energy commodity was thin since the globe's top consumer of oil, the U.S., is observing Martin Luther King Jr. Day so markets are closed.
But the activity that did ensue was largely influenced by the Standard & Poor's downgrades to euro zone nations as well as geopolitical situations in Iran and Nigeria.
"As investors try to digest the news and the downgrade from S&P, it seems like the market is moving forward toward the previous range with the possibility for WTI to test $100 a barrel this afternoon," research analyst Myrto Sokou with Sucden Financial told Dow Jones Newswires. "The base outlook for the euro zone weighs on the market, but it has been slightly overshadowed from tensions in Iran and Nigeria."
But Monday saw the oil minister of Saudi Arabia, the globe's top shipper of the energy commodity, state the nation wants to see the price of oil remain consistent at $100 per barrel.
At 3:32 p.m. on Monday, crude oil futures advanced 1.02 percent, a $1.13 advance to $111.48 per barrel.
CNN reports Saudi Arabia, equipped with more than twice as much in oil reserves as Iran, is prepared to compensate for disruptions to the global supply should sanctions be levied against Iran.
Saudi Arabia's reserves total 260 billion barrels and Iran is its nearest competitor within OPEC.
"We have the capacity to produce 12.5 (million barrels per day) and we are idling now between 9.4 and 9.8. So we have substantial spare capacity," energy minister Ali Al Naimi told the news source. "I believe we can easily get up to 11.4, 11.8 almost immediately, in a few days. Because all we need is to turn valves. Now to get to the next 700 (thousand) or so, we probably need about 90 days."
The minister also downplayed the likelihood of the closure of the Strait of Hormuz for very long, noting that the global community would stand in opposition to the disruption.
"I personally do not believe that the Strait, if it were shut, will be shut for any length of time," he told CNN. "The world cannot stand for that."