Oil prices rose to near $92 a barrel Thursday as negotiations between six world powers and Iran about its nuclear program appeared to be stalling.
By early afternoon in Europe, benchmark oil for July delivery was up 89 cents to $90.79 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell $1.95 to settle at $89.90, the lowest since Oct. 21.
In London, Brent crude for July delivery was up 52 cents at $106.08 per barrel on the ICE Futures exchange.
Iran has rejected proposals by six world powers to curb its nuclear program, while demanding answers to its own counteroffer meant to alleviate concerns about its ability to build atomic weapons. Still, the negotiations did not appear in danger of collapse as envoys convened again in Baghdad. The talks were expected to wrap up later Thursday.
Earlier this year, tensions with Iran, OPEC's second-largest producer, drove up oil prices.
The U.S. and Europe have imposed sanctions against Iran's oil exports, but some analysts say Iran may be allowed to keep exporting oil this year while it negotiates about its nuclear program.
"If the sanctions were to be fully enforced, up to 1 million barrels per day could be affected," said a report from Commerzbank in Frankfurt.
Crude has plunged about 15 percent from $106 three weeks ago because economic growth and oil demand in Europe, the U.S. and China are likely to be less than expected this year.
On Thursday, HSBC Corp. said its Purchasing Managers Index based on a survey of Chinese manufacturers showed activity weakened further in May. A preliminary PMI, based on responses by 85 to 90 percent of companies surveyed for the full index which is released later, fell to 48.7 from April's 49.3 on a 100-point scale. Numbers below 50 indicate a contraction.
China's Cabinet promised Wednesday to step up efforts to boost growth after the economy expanded 8.1 percent in the first quarter, the lowest in almost three years.
Political turmoil this month in Greece has also spooked investors, who fear the country may leave the euro common currency, which could spark financial and economic chaos in Europe.
"The number one issue is the uncertainty and financial instability a chaotic Greek exit from the euro would cause," said Victor Shum, an energy analyst with consultant Purvin & Gertz in Singapore. "However, barring such an exit, crude demand should improve over the summer and prices should strengthen moderately."
Tightening crude supplies in the U.S. have also weighed on oil prices. The Energy Department's Energy Information Administration said Wednesday that crude inventories last week rose for a ninth consecutive week.
In other energy trading, heating oil was up 1.1 cents at $2.8265 per gallon and gasoline futures added 0.72 cent at $2.8087 per gallon. Natural gas rose 0.4 cent at $2.741 per 1,000 cubic feet.
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