A deterioration of relations between Opec member Iran and the West over the oil producer's nuclear programme undermined supply forecasts this week, keeping oil prices elevated despite concern over the global economy.
Brent Crude oil is at $110 a barrel, with U.S. Crude (WTI) at $102, after reports that the European Union is considering a ban on Iranian oil exports which may interrupt oil supply to the region.
Iran produces 4,245,000 barrels of oil a day, according to the latest BP statistical review of world energy.
Oil shock: Protesters set fire to the British and Israeli national flags during an anti-British demonstration outside the British embassy in Tehran.
The British embassy in Tehran was stormed by protestors last week. In response, diplomats working at the Iranian embassy in London were expelled last Friday.
The U.S. Senate last week voted to penalise financial companies which did business with Iran's central bank, because of worries over the country's nuclear programme.
On Sunday, Iran's official Irna news agency reported it had shot down an unmanned US drone aircraft.
Christophe Barret, global oil analyst at Credit Agricole CIB, told Reuters: 'The risk of disruptions to oil supplies remains high.'
The risk of reduced supply from Iran offset demand fears arising from the deepening crisis in the eurozone, which threatens to knock global economic growth.
Warning: Bob Dudley, Group Chief Executive of BP, said the U.S. could not insulate itself against an oil shock.
BP chief Bob Dudley warned today that the fragile economic recovery could be negatively affected by high oil prices, especially in the United States.
Oil prices have remained above $100 for most of 2011 thanks largely to strong growth in Asia and instability in producing countries such as Iran and Libya.
Speaking at the world's largest oil and gas producers gathered in Qatar, Mr Dudley said: 'It is important in the current situation of a fragile global economy and I think right now we are probably walking a fine line.
'It is impossible to say what price exactly will affect the economic recovery but we do know which regions will be affected most', he said, adding that the United States was most vulnerable because of its slim fuel tax buffer to soften the blow of rising oil prices through pump price tax cuts.
'There is a risk that in the world's largest economy and largest oil consumer, the United States, could be hit by a lack of supplies and a high price of oil with consequences for the rest of the world,' he said, adding that any slowdown in the U.S. economy would inevitably weigh on global growth.
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