Oil prices soar on Greece bailout deal

(NEW YORK) - Oil prices soared Tuesday, with the New York futures contract hitting a nine-month high, after the European Union and Greece agreed a second bailout package to avert the country's looming debt default.

New York's main contract, light sweet crude for March delivery, closed at $105.50 a barrel its highest level since May 4.

The benchmark West Texas Intermediate contract gained a whopping $2.26 from Friday's closing level. US markets were closed Monday for a public holiday.

In London, Brent North Sea crude for delivery in April settled at $121.66 a barrel, up $1.61 from Monday.

The market "is up very, very nicely," said Bart Melek at TD Securities.

"A big, big part of that is the deal in Greece. The risk appetite is higher," he added.

Rich Ilczyszyn, an analyst at ITrader, said the market surge has established a new price range for oil. "I suspect now that the base for oil will be $100," he said.

After weeks of suspense, EU and Greek officials hammered out early Tuesday a 237-billion-euro ($313.6 billion) rescue package that saves Greece from default -- at least for now -- and keeps it in the single currency bloc under strict controls.

Barclays Capital analysts said a pick-up in demand in China could also keep oil prices well-supported.

"In crude oil, we believe inventory rebuilding has only just begun and could add significant extra oil demand over the next few months," they said.

Crude prices reached their highest levels in nine months on Monday in anticipation of the Greek deal and after Iran said it would halt oil exports to Britain and France in retaliation for a phased EU ban on its crude, which has yet to take full effect.

The decision is not expected to have a big impact as France last year bought only three percent of its oil from Tehran, while Britain is believed to no longer be importing Iranian oil.

Worries that Israel may launch a preemptive strike against Iran if it seeks to arm itself with nuclear weapons kept supply concerns on the boil. Tehran insists its nuclear program is solely for peaceful purposes.

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