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Africa

Turmoil sends crude oil prices soaring

Text by News Wires

Latest update : 2011-02-23

The turmoil in Libya – Africa’s fourth largest oil producer – has sent crude prices soaring, pushing the price of Brent North Sea crude up to as much as $108.57 per barrel on Wednesday, the highest level since September 2008.

REUTERS - Brent crude futures rose on Wednesday as Libya's ongoing turmoil fuelled fears the unrest could spread to other oil producing nations and choke supplies.

Brent crude futures were $1.30 up at $107.08 a barrel by 1000 GMT, having hit a 2-1/2-year high of $108.70 on Monday. U.S. crude futures <CLc1 firmed by 51 cents to $95.93 a barrel by the same time, the highest level since October 2008.

 
Repsol, Eni and BASF's Wintershall have all halted operations amid violent clashes in Libya, which pumps 1.6 million barrels per day (bpd), or nearly 2 percent of global supply.
 
The disruptions mark the first reduction in oil supply stemming from a wave of protests that have swept through the oil-producing Middle East and North Africa.
 
Investors fear for the potential impact on the flow of oil from top exporter Saudi Arabia if it suffers similar unrest.
 
"In total, some 300,000 barrels per day is now offline," MF Global analysts wrote in a note. "The numbers could rise as we still do not have a clear idea how much oil is being impacted by striking Libyan workers deep inside the country."
 
Commerzbank analyst Carsten Fritsch said Brent prices were also supported after Saudi Arabia stopped short of announcing an increase in production. Saudi Arabian Oil Minister Ali al-Naimi said on Tuesday the Organization of the Petroleum Exporting Countries led by Saudi Arabia was always ready to pump more oil, but only when needed.  
 
Oil supplies eyed, U.S. stocks awaited
 
Although protests in Saudi Arabia have so far been low key, Shi'ites in neighbouring Bahrain are protesting against the Sunni-led government, and there is concern this could spill over to the Shi'ite minority living in Saudi Arabia's oil-producing eastern province.
 
"The importance of Bahrain is perhaps being underplayed currently. While not a major oil producer, Bahrain's impact on the oil market reverberates through its importance in Saudi Arabia," said Barclays Capital analysts Helima Croft and Amrita Sen in a research note.
 
Libya's unrest has also affected natural gas supplies, with supplies to Italy on the Greenstream pipeline suspended. Libyan leader Muammar Gaddafi has refused to step aside despite the growing revolt and threatened tougher action against protesters in a defiant speech on Tuesday.
 
International Energy Agency (IEA) executive director Nobuo Tanaka said that oil prices above $100 per barrel for the rest of the year could tip the global economy back into a repeat of the 2008 economic crisis.
 
"We are very much concerned about the situation, it's a risk to the stable supply of oil," Tanaka told Reuters at the International Energy Forum in Riyadh on Tuesday.
 
Brent crude has risen around 12.5 percent so far this year. U.S. crude is up just under 5 percent on the year, but is over $50 below its 2008 high of $147.27.
 
Analysts said U.S. light crude futures remained well supported following the roll of the contract, although a potential build-up of weekly U.S. crude oil stockpiles expected later could pressure prices.
 
"The fact that WTI has risen further is mainly related to the contractual rollover, as the new front month contract was two dollars higher than the expiring contract," Fritsch said.
 
A rise in Japanese crude oil stocks and an expected increase in U.S. inventories could however ease supply concerns, analysts said.
 
U.S. inventory data from both American Petroleum Institute and EIA are delayed a day this week due to the Presidents Day holiday on Monday, with the API report due at 2130 GMT and the EIA awaited on Thursday.
 
Analysts polled by Reuters expect crude inventories in the U.S. rose for the sixth consecutive time last week.

Date created : 2011-02-23

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