Crude Oil Increases to Highest Price in Almost 30 Months on Libya Strikes
March 23 (Bloomberg) -- John Stephenson, a fund manager at First Asset Investment Management Inc., talks about the outlook for commodity prices, investment strategy and some of his commodity stock picks. Stephenson, author of "The Little Book of Commodity Investing," speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Crude climbed near a 30-month high as the U.S. and its allies attacked Libyan leader Muammar Qaddafi’s troops and protesters clashed with government forces in Syria, bolstering concern supplies will be disrupted.
Oil rose 0.7 percent as coalition forces targeted tanks, artillery, supply lines and communications points, said U.S. Rear Admiral Gerard Hueber. Prices have advanced 16 percent this year as unrest spread from Tunisia to Egypt, Yemen, Bahrain and Syria. The U.S. government said that crude supplies increased as gasoline stockpiles fell to the lowest level this year.
“Prices are moving up because of the fear premium,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “Oil inventories continue to build, but nobody cares because they are afraid about what’s taking place in the Middle East. The fundamentals don’t matter right now.”
Crude oil for May delivery rose 78 cents to $105.75 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 26, 2008. Prices have advanced 29 percent in the past year.
Brent crude oil for May settlement slipped 15 cents to end the session at $115.55 a barrel on the London-based ICE Futures Europe exchange.
Credit Suisse Group AG raised its estimates for Brent crude for 2011 to an average of $105.80 a barrel and for West Texas Intermediate on the Nymex by 10 percent to $93.80, the Zurich- based bank said in a note today. It cited higher demand growth and Middle East output disruptions as reasons for the increase.
Bomb Attack
Prices briefly extended gains after a bomb blast at a bus stop outside of Jerusalem’s central station injured at least 31 people today. Retaliatory strikes by Israel have bolstered oil in the past because they raise the prospect of a halt in shipments from the region.
“Prices even moved on a bomb attack in Jerusalem, which shows just how nervous the market is,” Horwitz said.
Libyan government forces have increased their attacks on cities, killing 16 people today in embattled Misrata and six in the nearby coastal town of Zentan, opposition spokesman Abdulhafid Ghoga said at a news conference in Benghazi.
The Libya conflict, which began in February, is the bloodiest in uprisings that have spread across the Middle East.
“There isn’t any reason for prices to move lower given the geopolitical situation,” said Ric Navy, a broker at BNP Paribas SA in New York. “It looks like we will continue moving higher, it’s just a question of how choppy it will be.”
Syrian Shooting
At least four people were killed today in a shooting near a mosque in the southern Syrian town of Daraa in protests that have engulfed the country for the past week. Yemeni President Ali Abdullah Saleh won backing from parliament to enforce emergency rule, while agreeing to hand over power by the end of the year.
“Qaddafi has sworn to fight to the end and we’re seeing increased violence in Syria and Yemen, which all point to falling supply,” said Mike Fitzpatrick, a partner with the Kilduff Group in New York, a hedge fund that concentrates on energy. “The U.K. cut its GDP forecast and we should see other European countries follow suit, which will hit demand.”
Chancellor of the Exchequer George Osborne said the British economy will grow more slowly than previously forecast in 2011. The Office for Budget Responsibility predicts annual growth in 2011 of 1.7 percent, down from the 2.1 percent forecast in November, Osborne said.
Purchases of new U.S. homes declined in February to the slowest pace on record, figures from the Commerce Department showed today in Washington.
Geopolitical Premium
“Prices are up because of fear related to all of the headlines from the Middle East,” said Edward Meir, senior analyst at MF Global in New York. “None of these countries are very important for oil supplies, other than Libya.”
U.S. crude inventories rose for a third week, climbing by 2.13 million barrels to 352.8 million in the seven days ended March 18, the Energy Department report showed. Supplies were forecast to increase by 1.5 million barrels, according to the median of 15 analyst estimates in a Bloomberg News survey.
Gasoline stockpiles fell 5.32 million barrels to 219.7 million, the lowest level since December. Supplies were forecast to decline by 2 million barrels.
“There continue to be big drawdowns in gasoline, which is quite bullish, while crude supplies continue to rise,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “Gasoline demand is rising as the economy recovers and soon gasoline may start to outperform crude.”
Total fuel demand increased 1 percent to 19.3 million barrels a day. Gasoline consumption climbed 2.8 percent to 9.07 million barrels a day.
Oil volume in electronic trading on the Nymex was 461,698 contracts as of 3:10 p.m. in New York. Volume totaled 542,371 contracts yesterday, 33 percent below the average of the past three months. Open interest was 1.5 million contracts, the lowest level since Jan. 25.
To contact the reporters 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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