Oil rises after EU reaches Iran sanctions agreement

Brent crude rose Wednesday, touching a seven-week high after the European Union reached a preliminary agreement to ban imports of Iranian crude, escalating tensions in the West's standoff with Tehran that has gripped oil markets for weeks.
European diplomats said they had a preliminary agreement but had yet to decide when an embargo would be put in place. The news sent Brent crude up nearly $2 a barrel.
A senior Iranian official responded that the OPEC nation already has alternative outlets available to maintain its 2.3 mln bpd of oil exports, including sending more crude to China, the world's No. 2 consumer.
The tensions stemming from Iran's nuclear ambitions have supported oil prices in recent weeks. Tehran last week threatened to cut off oil flows through the strategic Strait of Hormuz in the event of an oil embargo. About 35% of all seaborne oil moves through the strait.
"India, China and some other Asia countries may end up getting a reduced price on Iranian oil and that could be good for their economies, but European countries will have to find other sources," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.
Brent February crude pared early gains by 12:17 a.m. EST , trading up 55 cents to $112.68 a barrel, off a session high of $113.97, which was its highest since November 14.
U.S. February crude traded down 28 cents to $102.68 a barrel, off a session high of $103.74.
Iran supplies about 450,000 bpd to EU member states, making the bloc collectively the second-largest market for Iranian oil after China.
While oil markets brace for a potential supply problem, a U.S. Treasury official said the United States believes Tehran's oil revenues can be choked off through a well-timed, phased-in curtailment of purchases that will not disrupt global oil markets. New U.S. sanctions signed into law on New Year's Eve envision such a phased-in approach, the official said.