Oil prices climbed on Monday as tensions increased over the security of oil shipments from the Persian Gulf. Natural gas prices rose more than 5 percent after one of America's biggest natural gas producers said it would cut production and exploration this year.
The price of oil stayed around $100 a barrel in recent weeks on concerns about tanker traffic through the Persian Gulf. Traders worry that those shipments, which supply one-sixth of the world's exports, could slow if Western nations continue to confront Iran over its nuclear program.
Iran has threatened to close off the Persian Gulf if the U.S. and other nations impose more sanctions. Those threats grew louder on Monday after the European Union agreed to stop buying Iranian oil in July.
Benchmark oil rose 67 cents to $99 per barrel at midday in New York. Brent crude, which is used to price foreign oils that are imported by U.S. refineries, rose by 50 cents to $110.36 per barrel in London.
Analysts said the European embargo would force a reshuffling of oil markets to make up for the loss of Iranian oil to the West. China, which is one of the biggest buyers of Iranian crude, probably will buy more Iranian oil at below-market prices as the embargo begins. That will reduce China's demand from other oil-producing countries that would then sell more to Europe.
"Iran needs to sell its oil to someone," independent analyst and trader Stephen Schork said. "Outside the West, Iran really has only one buyer: China. That means China's probably going to get some sweetheart deals."
In the U.S., natural gas prices jumped on Monday when Chesapeake Energy said it will cut production and exploration because of cheap prices and a massive buildup in supplies. Natural gas production has been surging in the U.S. thanks to new techniques that helped the industry aggressively drill into underground shale deposits.
Natural gas prices have dropped to the lowest wintertime level since 2002. The Chesapeake announcement pushed futures prices 13 cents higher to $2.47 per 1,000 cubic feet.
At the pump, the national average for a gallon of gasoline stayed at $3.38, according to AAA, Wright Express and Oil Price Information Service. That's nearly 16 cents higher than it was a month ago and up 27 cents from a year ago.
In other energy trading, heating oil rose 2 cents to $3.01 per gallon, while gasoline futures were flat at $2.78 per gallon.