By Christopher Alessi
Oil prices rose Wednesday as ongoing antigovernment protests in Iran raised concerns about potential supply disruptions.
Light, sweet crude for February delivery gained $1.09, or 1.8%, to $61.46 a barrel on the New York Mercantile Exchange, on track to close at the highest level in three years. Brent, the global benchmark, advanced 92 cents, or 1.4%, to $67.48 a barrel.
Antigovernment demonstrators have taken to the streets in cities across Iran over the past week to voice anger over the country's economic woes. The protests, which have left more than 20 people dead, have reignited a geopolitical risk premium in global oil markets amid concerns the civil unrest could result in crude supply disruptions out of the Islamic Republic.
The "potential escalation out of Iran" is supporting oil prices, said Ole Hansen, head of commodity strategy at Saxo Bank.
"With geopolitical risk driving the market, the appetite of selling ahead of a potential spike is limited," he added.
So far, "protests in Iran have had no impact on the country's oil production or oil shipments," according to analysts at Commerzbank.
But they cautioned the situation could change if the U.S. were to impose fresh sanctions on the Iranian regime or dismantle the 2015 international agreement to curb Iran's nuclear program.
"This justifies a certain risk premium on the oil price, though this should already be more than sufficiently reflected in the current price level," the Commerzbank analysts wrote in a note Wednesday.
The unrest in Iran comes as oil prices have been steadily climbing in recent months, helped by geopolitical risk throughout the Middle East -- including in Iraq -- as well as declining global inventories and OPEC's continued efforts to curb production.
The Organization of the Petroleum Exporting Countries -- of which Iran is the third-largest member -- and 10 producers outside the cartel, including Russia, agreed in November to extend a deal to cut crude output by nearly 2% through the end of this year. The original accord was first struck as part of strategy to rein in the global supply glut and boost prices.
Crude prices also faced some downward pressure Tuesday, as the Forties Pipeline System in the North Sea came fully back online. The pipeline, which transports 450,000 barrels of North Sea oil a day, was shut down in mid-December due to a hairline pipe crack, tightening supply and buoying prices.
Gasoline futures rose 1.8% to $1.7956 a gallon and diesel futures gained 0.6% to $2.0701 a gallon.
Stephanie Yang contributed to this article
Write to Christopher Alessi at [email protected]