March 26 (Bloomberg) -- Crude oil jumped to the highest price this year after Iran took British naval personnel captive and the UN imposed sanctions on the country.

The U.K. government said it was ``utterly confident'' that 15 members of its military were in Iraqi waters when they were seized by Iranian forces on March 23. The United Nations Security Council approved new sanctions on March 24 over Iran's atomic program, voting unanimously to freeze the assets of a state-owned Iranian bank and impose penalties on some military commanders.

``The Iranians are still holding the British forces, which a lot of us thought would be resolved by now,'' said Tom Bentz, an oil broker with BNP Paribas Inc. in New York. ``The sanctions against Iran have been strengthened as well, which is a reminder of the tensions in the region. It looks like the standoff will be going on for a long time.''

Crude oil for May delivery rose 63 cents, or 1 percent, to settle at $62.91 a barrel at 2:50 p.m. on the New York Mercantile Exchange. Futures touched $63.30, the highest close for a front- month contract since Dec. 20. Prices are down 2.1 percent from a year ago.

Brent crude oil for May settlement rose $1.23, or 2 percent, to $64.41 a barrel on the London-based ICE Futures exchange, the highest close since Dec. 1. Futures touched $64.63 a barrel, the highest intraday price since Dec. 4.

Iran has the second-biggest proved oil reserves and is the second-biggest producer in the Organization of Petroleum Exporting Countries. Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.

Taken at Gunpoint

The eight Royal Navy sailors and seven Royal Marines were taken at gunpoint in the Persian Gulf. They had just conducted a routine inspection of a merchant ship when their two boats were surrounded and escorted by Iranian vessels into Iran's territorial waters, according to the U.K. Iran said the Britons, 14 men and one woman, were in Iranian waters.

``There is no doubt in our mind at all that they were in Iraqi waters,'' Prime Minister Tony Blair's spokesman Tom Kelly told reporters in London today. ``We are utterly confident that the personnel detained were in the right waters and we call for their immediate release.''

The seizure occurred a day before the UN toughened sanctions approved in December. Iran has defied two UN resolutions demanding a halt to enrichment, which the U.S. and European governments suspect is part of a nuclear-weapons development effort. Iran says it is pursuing an atomic program to meet future domestic electricity demand, and doesn't seek a nuclear bomb.

Lower Inventories

``The market is obviously concerned about what is happening with Iran,'' said Phil Flynn, a commodities trader for Chicago- based Alaron Trading. ``Even without the growing tensions with Iran prices would be up because the fundamentals are strong. Inventories of crude, gasoline and distillate are all lower than a year ago while demand is higher.''

Gasoline supplies fell 7.3 percent to 210.5 million barrels in the six weeks ended March 16, leaving them 5 percent lower than a year earlier, according to the Energy Department. Demand, which peaks between the Memorial Day holiday in late May and Labor Day in early September, was 2.1 percent higher than a year earlier in the four weeks ended March 16, the department said.

Stockpiles of distillate fuels, which include heating oil and diesel, plunged 17 percent to 118.7 million barrels over eight weeks ended March 16, department figures show.

``Gasoline will drive crude oil higher,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``The profit margin is strong, which will encourage refiners to increase their operating rates and lead to increased oil consumption.''

Profit Margins

The profit margin, or ``crack'' spread, for turning three barrels of crude oil into two barrels of gasoline and one of heating oil jumped 12 percent to $18.3656 today, based on closing futures prices in New York. It was the biggest single-session gain since Feb. 21. The crack surged to $21.0106 on March 20, the highest since Sept. 29 2005.

Gasoline for April delivery in New York rose 6.94 cents, or 3.5 percent, to $2.0677 a gallon, the highest close since Aug. 15. It was the biggest one-day gain since Feb. 13.

Regular gasoline at the pump, averaged nationwide, rose 0.4 cent to $2.581 a gallon, according to AAA, the nation's largest motorist organization. Gasoline prices have jumped 11 percent over the past month and are up 3.1 percent from a year ago.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: March 26, 2007 15:25 EDT