Oil Surges to $119 on Libya Crisis; Goldman Sees ‘Upside Risk’

Oil climbed to the highest in 30 months in London as Libya’s violent uprising reduced supplies from Africa’s third-biggest producer.

Brent rose above $119 a barrel on estimates the revolt caused Libya to lose as much as two-thirds of its oil output. Futures in New York gained for a sixth day, after climbing above $100 a barrel. The cuts create “significant upside risk” to prices and any further disruptions could create severe shortages in global oil markets, Goldman Sachs Group Inc. said.

“When geopolitics in the Middle East are at play in the oil markets, all conventional bets on the direction of oil prices based on supply and demand fundamentals are off,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London.

Brent oil for April settlement rose as much as $8.54, or 7.7 percent, to $119.79 a barrel on the ICE Futures Europe exchange, the highest since Aug. 21, 2008. The contract traded at $115.15 at 1:13 p.m. London time. It has rallied 12 percent this week.

Crude for April delivery on the New York Mercantile Exchange gained as much as $5.31, or 5.4 percent, to $103.41 a barrel in electronic trading. Yesterday, it added $2.68 at $98.10, the highest settlement since Oct. 1, 2008.

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, shipping most of its crude and fuels across the Mediterranean to Europe. The country has the largest reserves in Africa.

Output Halt

As much as 1 million barrels of Libya’s daily oil production may have been shut, Barclays Capital said in a report yesterday. Goldman Sachs estimated disruptions at 500,000 barrels a day. Total SA and OMV AG became the latest energy producers to scale back operations, following Eni SpA, RWE AG and BASF SE’s Wintershall unit. China National Petroleum Corp. said it relocated 47 of its Libyan-based workforce.

New York futures retreated from an intraday high of $100 a barrel yesterday after Saudi Arabia and other countries said they won’t wait for an emergency meeting of OPEC to increase output, according to a person with knowledge of producer-nation policy. Any extra supply would be conditional on requests for more crude, the person said.

“One reason we haven’t seen a far more aggressive rally is because from an OPEC spare capacity perspective they are far healthier now,” Soozhana Choi, head of Asian commodities research at Deutsche Bank AG in Singapore, told Rishaad Salamat on Bloomberg Television’s “On the Move.” “Beyond spare capacity, if you look at commercial inventories, they are quite healthy as well.”

U.S. Inventories

Gasoline prices advanced to their highest since September 2008. Contracts of the fuel for March settlement on the Nymex gained as much as 14.1 cents to $2.8560 a gallon. The motor fuel also reached similar highs in Europe to trade at $980 a ton.

Crude stockpiles in the U.S., the world’s largest oil user, climbed 163,000 barrels last week, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today may show supplies increased 1.1 million barrels in the seven days ended Feb. 18 from 345.9 million, according to the median estimate of 15 analysts surveyed by Bloomberg News.

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. Disturbances have spread to Iran, Bahrain, Yemen and Algeria.

Unrest in Bahrain, which is linked to Saudi Arabia by a 26- kilometer (16-mile) causeway, has in the past spread across the border. In 1995, the Saudi government arrested a large number of Shiite Muslims on suspicion of involvement in protests taking place in Bahrain, said New York-based Human Rights Watch.

$220 Oil

Prices may surge to $220 a barrel if more production is halted in Libya and Algeria, analysts at Nomura Holdings Inc., led by Michael Lo in Hong Kong, said yesterday in a note. Algeria is also an OPEC member.

“There is room for spikes, possibly to $175,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, told Susan Li on Bloomberg Television’s “First Up.” “Something like that would have to take an extreme situation, more unrest in the Middle East, particularly Saudi Arabia.”

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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