Oil holds near $120, buyers take less Iran oil

Oil held close to USD 120 a barrel on Tuesday as world consumers grappled with supply disruptions ranging from Iran to Sudan to the North Sea.

Oil also rose briefly after Europe's much-awaited bailout of Greece. But while the deal resolves Athens' immediate financing needs, it is unlikely to revive its shattered economy.

Benchmark Brent edged up 5 cents to USD 120.10 by 1328 GMT after closing above USD 120 on Monday for the first time since June 15.

US crude was at USD 104.72, up USD 1.48, after touching USD 105.44 on Monday, its highest since May 5.

The loss of some global supply, a recovering US economy and China's easing policy to support growth have lifted oil and stoked investor appetite for riskier assets.

And oil's rally is unlikely to lose steam as Western sanctions bite into supply from Iran, OPEC's second-largest producer. The European Union enraged Tehran last month when it agreed to slap a ban on Iran's oil from July 1.

On Sunday, Iran announced a retaliatory halt in oil sales to French and British companies, a largely symbolic step as exports to the two countries were already greatly reduced.

"Sabre-rattling on the part of Iran is continuing to lend support to the price ... which 'punishes' all EU countries for their boycott decision," said Carsten Fritsch of Commerzbank. The euro oil price is just below its mid-2008 record high, he said.

Iran kept up the pressure on Tuesday, saying it might stop exporting to European countries that have not clarified their position on oil imports.

But Iran's biggest customers in Europe have already made substantial voluntary cuts ahead of the EU embargo.

Lifters of Iranian crude in Asia have also trimmed imports before enforecement of the West's tighter sanctions that aim to starve the Islamic Republic of oil revenue to support its controversial nuclear programme.

Top buyer China will import less oil from Iran this year and Iran's third-largest customer Japan is likely to reduce imports from Tehran to win waivers from US sanctions.