LONDON, Dec 13: Oil spiked on Tuesday as market got caught up in rumours about Iranian military exercises in the key Gulf route and hoped for more stimulus measures from the US Federal Reserve, traders said.

In afternoon deals, the price of Brent North Sea crude for delivery in January surged to $111.10 per barrel, before pulling back to $109.32, which was still a hefty gain of $2.06 from Monday’s closing level.

New York’s main contract, light sweet crude for January, leapt as high as $101.25. It later stood at $99.70, up $1.93 from Monday.

“Oil prices jumped sharply in the afternoon session on reports of Iranian military exercises in the Strait of Hormuz, which was later denied by an Iranian foreign ministry spokesman,” said CMC Markets analyst Michael Hewson.

Traders remain fearful that Tehran could try and block the strategically-sensitive Strait of Hormuz that links the Gulf with theGulf of Oman and through which much of the region’s oil is transported.

“It shows how sensitive the oil market is when a rumour of Iran’s intention of closing the Strait of Hormuz on a whim cause the price to spike,” said broker Owen Ireland at Valbury Capital.

“Whether or not the rumour is true ... remains to be seen but it is important to consider how much power Iran has over the black stuff.”

Opec, meanwhile, appears set to reach consensus over maintaining its official output quota at a meeting in Vienna, as data showed the its crude production was at the highest level for more than three years last month.—AFP