European cold snap fuels Brent highs Brent crude oil consolidated its recent gains to six-month highs amid continued freezing weather in Europe and worries about supplies from Iran and Africa. The prolonged cold snap has increased demand for heating oil, leading to widening refining margins. Renewed buying of oil of similar grades to Iranian crude ahead of European Union sanctions against the world's third-largest oil exporter has also supported demand. This has pushed up the price of Brent for immediate delivery, and the crude benchmark's futures price curve, which was flat at the start of the year, has formed a downward slope since the start of February. Known in the industry as "backwardation," the condition shows a tight supply-demand balance. In January, with production from Opec, the oil producing cartel, at a three-year high, the supply and demand situation had been slack. Worries about the acute supply tightness seen at the end of last year disappeared and the Brent futures curve briefly fell into "contango," the opposite condition of Brent. At the start of 2012, investors saw the seasonal refinery maintenance period also weighing on demand. "It was only natural to assume that a soft oil market balance would continue to weigh on time spreads regardless of whether geopolitical risks supported outright price levels," said Amrita Sen, oil analyst at Barclays Capital. ICE March Brent was up 47 cents a barrel at $116.70 in New York midday trading yesterday, while Nymex March West Texas Intermediate was 39 cents higher at $98.80 a barrel. Urals crude oil, the Russian benchmark, was trading 25 cents above Brent, another sign of physical tightness. Urals, which is lower quality, high sulphur crude, is regarded as similar to Iranian oil. After trading above Brent since October on Iranian tension, Urals fell back into a discount on expectations of higher output by Saudi Arabia to make up for a shortfall from sanctions on Iran. Analysts said the steepening of the Brent curve was partly due to institutional money flowing into the oil market. "We believe there has been new money being allocated and invested into the market at the beginning of the month," said James Zhang, oil analyst at Standard Bank.