Oil surged to $100 a barrel in New York for the first time in two years as Libya’s violent uprising threatened to disrupt exports from Africa’s third-biggest supplier and spread to other Middle East oil producers.
Futures climbed as much as 4.8 percent after heavy gunfire broke out in Tripoli again today, army units defected and a former aide to Libyan leader Muammar Qaddafi warned the spreading revolt may topple the regime within days. Oil pared gains on signals that Saudi Arabia and some other producers are willing to put more oil on the market if buyers demand it.
“We’re crossing $100 because with the cut in Libyan output, the unrest in the Middle East is actually having an impact on oil supply,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s concern that unrest will spread further, threatening Saudi Arabia and other producers.”
Crude for April delivery increased $2.68, or 2.8 percent, to settle at $98.10 a barrel on the New York Mercantile Exchange. Earlier, it touched $100, the highest level since Oct. 2, 2008. Futures are up 24 percent from a year ago.
Prices rose from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles gained 163,000 barrels to 345.8 million. April oil advanced $3.32, or 3.5 percent, to $98.74 a barrel in electronic trading at 4:32 p.m.
Libya, which pumps 1.6 million barrels a day of oil, is the ninth-largest producer among the 12 members of the Organization of Petroleum Exporting Countries, sending most of its crude and fuels across the Mediterranean to Europe. The country has the largest reserves in Africa.
“Prices are moving above $100 because of worries Libyan supplies will be cut off,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts.
The tanker Seabravery picked up oil at the Libyan ports of Zawia and Es Sider and sailed at 1 a.m. local time, suggesting supply is still flowing, according to Dimitris Tsahalis, chartering manager at Athens-based Thenamaris Ships Management Inc., which owns the vessel.
Oil retreated from $100 after a person with knowledge of producer-nation policy indicated Saudi Arabia and other countries might not wait for an emergency OPEC meeting to increase output. Any extra supply would be conditional on requests for more crude from oil companies, the person said.
Libya is the latest nation to be rocked by protests ignited by the ouster of Tunisia’s president last month and fanned by the Feb. 11 fall of Egyptian President Hosni Mubarak.
“We’re going to see continued support until we see a resolution in Libya,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky. “While there’s a risk of contagion, of this spreading to Iran or Saudi Arabia, we’re going to see prices elevated from these levels.”
Qaddafi vowed yesterday to fight the growing rebellion until his “last drop of blood.”
Saudi Arabia’s King Abdullah boosted spending today on housing by 40 billion riyals ($10.7 billion) and allocated more funds for education and social welfare after protests reached neighboring Bahrain. The kingdom is the world’s largest crude exporter.
The Bahraini and Saudi kings met in Riyadh today after more than a week of protests in Bahrain. The island nation is linked to Saudi Arabia by a 26-kilometer (16-mile) causeway, and unrest there has in the past spread across the border.
Oasis in Sandstorm
“People are waiting for the next shoe to drop,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “Saudi Arabia is an oasis in the middle of a sandstorm.”
Brent oil for April settlement rose $5.47, or 5.2 percent, to $111.25 a barrel on the ICE Futures Europe exchange, the highest close since August 29, 2008.
The global economy is in a much stronger position to handle rising oil prices than it was in 2008, when crude shot up to a record $147.27 a barrel in New York, U.S. Treasury Secretary Timothy F. Geithner said today during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”
Oil prices may surge to $220 if production is halted in Libya and Algeria because of spreading unrest in the region, Nomura Holdings Inc. said today in a note. Algeria is also a member of OPEC.
April call options betting futures would rise above $100, $105, $110, $120 and $150 a barrel were the most-active options contracts in electronic trading on the Nymex today, together trading more than 29,000 lots as of 4:33 p.m. in New York.
“The big trade today is June $125 calls being purchased,” said Ray Carbone, president of Paramount Options Inc. in New York and a trader at the Nymex. “Yesterday, I did thousands of the May $125-$150 call spreads.”
An Energy Department report tomorrow may show U.S. crude stockpiles rose for a sixth week, matching the longest streak of gains since May. Supplies probably increased 1.1 million barrels in the seven days ended Feb. 18 from 345.9 million a week earlier, according to the median estimate of 15 analysts in a Bloomberg News survey.
Oil volume in electronic trading on the Nymex was 1.2 million contracts as of 4:33 p.m. in New York. Volume totaled 1.44 million contracts yesterday, 91 percent above the average of the past three months and the highest level since a record 1.47 million Jan. 28. Open interest was 1.51 million contracts.
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