Brent crude firm on U.S. oil inventories, Iran threat

LONDON (Reuters) – Brent oil rose on Wednesday, led by a threat of an oil crisis in the United States.

The price was near highs above $ 78 a barrel after an Iranian Revolutionary Guards ordering said he was ready to prevent regional crude oil exports if Iranian oil sales were banned by the United States.

Brent crude LCOc1 futures were up 5 cents at $ 77.81 a barrel by 1431 GMT, while U.S. crude futures CLc1 were down 24 cents at $ 73.90 a barrel, paring gains after rallying 1.2 percent on Tuesday.

Iranian President Hassan Rouhani appeared on Tuesday to threaten to disrupt oil shipments from neighbouring states if Washington continued to press Iranian oil.

Looming U.S. sanctions on Iranian crude exports, force majeure in Libya and unplanned pipeline outages in Nigeria have been clouding the supply outlook rising rising output by the Organization of the Petroleum Exporting Countries.

"In an ideal world an increase in global or regional oil production would have fallen. These are, however, no normal occurrences, "PVM Oil Associates strategist Tamas Varga said.

"Under these circumstances it is justified to argue for higher prices when production increases are announced," he said.

Trading is expected to be limited on Wednesday by US national holiday, the market has been more volatile.

Implied volatility options, a way of measuring the price of crude oil traders and investors, is at its highest since the run-up to the last month of the year.

With the unclear outlook, investors were turning to options to protect themselves against any sudden move, said Harry Tchilinguirian, head of commodities strategy at BNP Paribas.

"When there is consolidation in the market, there is also the expectation of an eventual price breakout in either direction. So in the market options, the volatility gets bid up, "he told Reuters Global Oil Forum.

Investors can bet on various aspects of an option, from the premium to the price of what option might move.