Heating Oil Reaches 29-Month High as Libya Conflict Escalates
Heating oil surged to a 29-month high as political strife in Libya escalated and anti-government protests spread in the Middle East, threatening oil shipments.
Futures rose as Libyan troops loyal to Muammar Qaddafi used artillery and helicopter gunships to block the rebels’ advance west from the oil hub of Ras Lanuf. Heating oil, traded as a hedge for diesel fuel, has surged 14 percent since anti- government protests began in Libya Feb. 15.
“All eyes are focused on escalating violence in Libya and what it portends for the greater Middle East in general,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “This is like a runaway freight train.”
Heating oil for April delivery gained 1.42 cents, or 0.5 percent to $3.1035 a gallon at 10:47 a.m. on the New York Mercantile Exchange. Prices touched $3.1372, the highest level since Sept. 8, 2008. Futures rose 5.4 percent last week.
Libyan crude oil production could be disrupted for several months, according to Societe Generale.
“The oil markets are pricing in an extended Libyan shutdown of crude exports,” Mike Wittner, New York-based global head of oil market research at Societe Generale, said today in an e-mailed report.
Fighting in Libya has reduced oil output in North Africa’s third-largest crude producer by two-thirds, or as much as 1 million barrels a day, according to the International Energy Agency, a Paris-based adviser to 28 oil-consuming nations.
European Refiners
Libya sells most of its crude to Europe. Less Libyan oil going to European refiners may reduce the region’s available gasoline exports and increase demand for distillate fuel from the U.S.
“As European refiners lose crude oil supply and cut runs, they need to find alternate supply for diesel and some of that can come from increased imports from the U.S,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
The U.S. is considering military options to support the anti-Qaddafi forces, though any such operation “has to be an international effort,” President Barack Obama’s chief of staff, William Daley, said yesterday.
The revolt in Libya is the bloodiest in a wave of popular uprisings in the Middle East in the past two months that have toppled Tunisia’s former leader, Zine El Abidine Ben Ali, and Egyptian President Hosni Mubarak. Anti-government demonstrations have also erupted in Yemen, Bahrain, Oman, Jordan, Algeria, Morocco, Iran and Iraq.
Gasoline Fluctuates
Gasoline fluctuated from a 30-month high as the average price at the pump topped $3.50 a gallon, increasing speculation that demand for the motor fuel will fall as prices rise.
Gasoline for April delivery gained 0.07 cent to $3.0471 a gallon, after touching $3.0936, the highest level for the front- month contract since Aug. 28, 2008. Gasoline advanced 11 percent last week, the most since the week ended Oct. 16, 2009.
Regular gasoline at the pump, averaged nationwide, advanced 0.6 cent to $3.509 a gallon yesterday, AAA said on its website, the highest level since Oct. 5, 2008. Pump prices have risen every day since Feb. 14.
“The rapid rise in prices is going to start impacting demand,” Lipow said. The market sees $3.50 a gallon gasoline and knows the consumers are changing their buying habits.”
To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
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