Oil prices were steady near US$125 a barrel Monday as the market kept an eye on a tropical storm which could affect oil facilities in the Gulf of Mexico. Concerns that a showdown over Iran's nuclear program could threaten crude supplies out of the Middle East also buoyed up prices.
By midday in Europe, light, sweet crude for September delivery was down 9 cents to US$125.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained US$1.02 on Friday to settle at US$125.10 a barrel.
In London, September Brent crude was up 29 cents at US$124.47 a barrel on the ICE Futures exchange.
The National Hurricane Center issued a hurricane watch Sunday for the coast of western Louisiana and eastern Texas, which means that hurricane conditions are possible from Tropical Storm Edouard until late Monday in the area.
The fifth named storm of the 2008 hurricane season has sustained maximum winds of about 50 miles (80 kilometers) per hour. By Sunday night, Edouard was located about 80 miles (129 kilometers) east-southeast off the mouth of the Mississippi River and about 390 miles (630 kilometers) east of Galveston, Texas.
Regarding Iran, U.S. Secretary of State Condoleezza Rice said Saturday that the United States would have no choice "but to begin again to prepare sanctions resolutions for the (U.N.) Security Council" if Iran did not halt the development of its uranium enrichment program.
Rice said that given the U.N.'s current scheduling, sanctions probably could not be expected in the next few weeks, but the U.S. will begin working with allies toward that goal.
"There's concern about a potential confrontation down the line," said Victor Shum, an energy analyst with Purvin & Gertz consultancy in Singapore.
Iranian President Mahmoud Ahmadinejad said Sunday that diplomacy is the only way out of his country's standoff with the West as an informal deadline expired on an offer of economic and other incentives by six world powers if Iran agreed to curb enrichment.
Iran's leader made the comments a day after asserting that his country would not give up its "nuclear rights," signaling that it would refuse demands to stop enriching uranium or at least not to expand its enrichment work.
The United States and its European allies fear Iran intends to use the technology to develop material for nuclear weapons under the cloak of a civilian nuclear power program. Iran denies the accusation.
On Friday, oil shot up as much as US$4 after news reports quoted Israeli Deputy Prime Minister Shaul Mofaz as saying that Iran's nuclear program was nearing a "major breakthrough" and that his country must be "prepared for every option."
Mofaz, a hawkish former defense minister and military chief, is a top contender to succeed Prime Minister Ehud Olmert, who announced last week he will resign in September amid a corruption probe.
In Nigeria, two French oil workers were kidnapped in the country's volatile southern oil region Sunday. A statement released by France's Foreign Ministry confirmed the kidnappings of the French nationals, but did not provide additional details about the two or say for which company they worked.
"You've got three supply-side worries pushing oil higher today: Iran, the storm and Nigeria," Shum said.
In other Nymex trading, heating oil futures rose 0.68 cent to US$3.4454 a gallon (3.8 liters) while gasoline prices gained 1.66 cents to US$3.1009 a gallon. Natural gas futures increased 9.1 cents to US$9.48 per 1,000 cubic feet.