Oil spikes on report of fall in Iran crude exports

New York's main contract, West Texas Intermediate crude for May, soared as high as $108.25 a barrel -- the highest since March 2 -- before pulling back to $106.87, up $1.52 from Thursday's closing level.

Brent North Sea crude for delivery in May jumped as high as $127.06 per barrel in late afternoon London deals. It later finished at $125.13, up $1.99.

There was no official word on how much Iranian crude exports may have fallen, but unconfirmed reports swirled about a 14 per cent drop. That was enough to spook the markets.

"The news about a decline in the Iranian oil exports offered strong upside momentum to the oil market today, with WTI crude oil surging to retest the $108 per barrel level," Sucden analyst Myrto Sokou added.

"The news is likely to support the oil market for the short-term. In addition, the weaker US dollar helped the strong rally."

The standoff between the West and crude producer Iran continues to be a key factor affecting oil prices.

US President Barack Obama said Friday that tension with Iran and "uncertainty" in the region was adding a $20-30 premium to oil prices.

"The key thing that is driving higher gas prices is actually the world's oil markets and uncertainty about what's going on in Iran and the Middle East" he said in an interview with the American Automobile Association.

Obama also said increasing demand for oil in China and India was driving prices.

"As more and more people around the world see their standards of living rising, they purchase cars, they have demand for oil, that creates a greater demand worldwide and that raises the price."

Meanwhile South Africa's government said Friday it was still mulling whether to reduce Iranian crude oil imports due to US sanctions.

"No decision has been taken by government on the sanctions issue because the investigation of the response options is far from complete," the energy department said.

"The government is also talking to a number of other countries that supply crude oil to determine what their potential to supply is."

Local media reported Friday that Tehran supplies at least 25 per cent of South Africa's crude needs.