Oil Trades Near Two-Week Low After Falling on Outlook for Japan's Demand

Oil traded near a two-week low in New York as concern that damage from Japan’s earthquake will curb crude demand outweighed speculation of supply disruptions in the Middle East.

Futures tumbled the most in almost five months yesterday after explosions and fire struck Tokyo Electric Power Co.’s Fukushima nuclear plant. The March 11 temblor caused a tsunami that disabled cooling systems at the facility. Bahrain declared a state of emergency as a second contingent of troops from Gulf nations poured into the kingdom, while Libyan government forces moved against rebels.

“The unrest in Libya has been pushed to the back burner by the tragedy in Japan,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. The crisis “at the Fukushima plant is a sign that we’re looking at a longer-term problem, which will have a considerable impact on the Japanese economy.”

Crude for April delivery traded at $97.30 a barrel, up 12 cents, in electronic trading on the New York Mercantile Exchange at 9:24 a.m. Sydney time. Yesterday, the contract dropped $4.01, or 4 percent, to $97.18, the lowest since Feb. 28. Prices fell the most since Oct. 19 and are up 19 percent from a year ago.

Brent oil for April settlement declined $5.15, or 4.5 percent, to $108.52 a barrel on the London-based ICE Futures Europe exchange yesterday, the biggest one-day drop since Feb. 4, 2010. Prices fell to a three-week low.

Refinery Fire

Refinery closures in Japan have affected about 1.3 million barrels of the country’s 4.52 million barrels a day of capacity, based on data from the Petroleum Association of Japan. JX-Nippon Oil & Energy Corp. closed refineries in Sendai and Kashima in the northeastern Tohoku region. A fire at the Sendai plant was extinguished at about 2:30 p.m. local time yesterday. The Negishi plant near Tokyo is also shuttered.

Cosmo Oil Co. shut its 220,000-barrel-a-day Chiba refinery following fires at liquefied petroleum gas storage tanks. Kyokuto Petroleum Industries Ltd. has shuttered its 175,000- barrel-a-day facility in Ichihara, near the capital.

Japan was responsible for 5.2 percent of global oil demand in 2009, according to BP Plc, which publishes its BP Statistical Review of World Energy each June. Japan is the third-biggest crude-consuming country after the U.S. and China.

U.S. crude oil supplies climbed 91,000 barrels last week, according to the industry-funded American Petroleum Institute. An Energy Department report today may show stockpiles rose 1.3 million barrels last week from 348.9 million, according to the median of 15 analyst estimates in a Bloomberg News survey.

Libyan Exports

Libya’s oil exports may be halted for “many months” because of damage to facilities and sanctions following a rebellion against leader Muammar Qaddafi, the International Energy Agency said yesterday in its monthly Oil Market Report.

King Hamad bin Isa Al Khalifa of Bahrain asked the head of the military to guarantee security across the country, state television said. Clashes between mainly Shiite protesters and Bahraini forces escalated on March 13, with more than 100 people injured as demonstrators demanded democracy through elections from their Sunni monarch.

Troops from the Gulf Cooperation Council, including Saudi Arabia, moved into Bahrain on March 14, the first cross-border intervention since a wave of popular uprisings swept through parts of the Arab world.

Iran criticized the deployment. “The presence of foreign troops and meddling into Bahrain’s internal affairs will only further complicate the issue,” Ramin Mehmanparast, a Foreign Ministry spokesman, said in Tehran yesterday. Bahrain recalled its ambassador after the statement, the island kingdom’s state television reported.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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