Crude Oil Advances to a 29-Month High, Gasoline Surges on Libyan Concern

Crude oil climbed to a 29-month high and gasoline surged on concern that the unrest curbing exports from Libya will spread to other countries in the region.

Oil futures advanced 2.6 percent as Libyan forces loyal to Muammar Qaddafi attacked rebels on the east coast where much of the country’s oil is refined and shipped abroad. Prices extended gains after a U.S. Energy Department report showed that crude and fuel supplies fell last week.

“Prices are up on concern that the problems in Libya will escalate, taking the remainder of the country’s oil off the market, and spread elsewhere,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “As long as the revolt continues, you are going to see a substantial risk premium in the oil price.”

Crude oil for April delivery rose $2.60 to $102.23 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 26, 2008. Futures are up 28 percent from a year ago.

Gasoline for April delivery advanced 4.61 cents, or 1.5 percent, to end the session at $3.0295 a gallon in New York. It was the highest settlement since Aug. 27, 2008.

Fighting in Libya may have shut as much as 1 million barrels a day of the North African country’s output, according to the International Energy Agency.

Rebels regained control of an oil facility in Brega, on the Gulf of Sidra today, driving away government forces, according to a local industry official.

Riots have toppled leaders in Tunisia and Egypt, and there have been protests in Yemen to the south of Saudi Arabia, the world’s biggest crude exporter. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch.

Tehran Clashes

Demonstrators clashed with security forces in Tehran yesterday. Iran’s Foreign Ministry said issues related to opposition figures in the country are “internal affairs,” without commenting on allegations that authorities had detained Mehdi Karrubi and Mir-Hossein Mousavi.

Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, pumped 3.7 million barrels of oil a day in February, according to Bloomberg News estimates.

In Oman, the largest Middle Eastern producer outside of OPEC, protesters blocked a highway linking the northern city of Sohar to the capital Muscat yesterday. The country pumped 885,600 barrels of oil a day in January, according to the state- run Oman News Agency.

Saudi Arabian Oil Co.’s Chief Executive Officer Khalid Al- Falih this week said the kingdom is “ready to supply incremental change in demand,” to cover any shortfall from Libya. Saudi Arabia pumped 8.43 million barrels a day of oil in February, according to estimates compiled by Bloomberg.

Saudi Offer

The kingdom offered two European refiners additional cargoes of Arab Light crude for loading in March to make up for the loss of Libyan oil, two officials involved in the negotiations said.

Brent crude for April settlement increased 93 cents, or 0.8 percent, to end the session at $116.35 a barrel on the London- based ICE Futures Europe exchange. It was the highest settlement price since Aug. 21, 2008.

A U.S. Energy Department report today showed that nationwide crude inventories slipped 364,000 barrels to 346.4 million in the seven days ended Feb. 25, the first decline in seven weeks. A 750,000-barrel gain was projected, according to the median of 17 analyst estimates in a Bloomberg News survey.

Prime Movers

“Supply and demand issues in the U.S. aren’t the main drivers of the market right now,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Headlines from the Middle East are what people are paying attention to and are the prime movers of prices right now.”

Supplies at Cushing, the delivery point for New York-traded West Texas Intermediate crude oil, surged 1.13 million barrels to 38.6 million, the highest level since at least 2004 when the department began tracking stockpiles at the hub.

Gasoline inventories tumbled 3.59 million barrels to 234.7 million, the biggest drop since October, the department said. Demand for the fuel rose 0.7 percent to 9.16 million barrels a day, the highest level since December.

Regular gasoline at the pump, averaged nationwide, climbed 1.2 cents to $3.387 a gallon yesterday, the highest level since Oct. 9, 2008, the AAA said on its website.

‘Bullish Report’

“This was a very bullish report for gasoline,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “Inventories are down and demand was up even though prices are rising. It’s pretty clear that we’ll be paying $4 a gallon at the pumps soon, probably by summer, or at the very least Labor Day.”

U.S. gasoline consumption peaks during the summer. The driving season lasts from the Memorial Day weekend in late May to the Labor Day holiday in early September.

Oil volume in electronic trading on the Nymex was 836,053 contracts as of 3:18 p.m. in New York. Volume totaled 739,473 contracts yesterday, 6.2 percent below the average of the past three months. Open interest was 1.57 million contracts, the highest since Sept. 12, 2007.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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