Oil Rises to 30-Month High on Libya Conflict; OPEC Output Slides

Oil rose to the highest in 30 months in New York on concern the conflict in Libya, Africa’s third- largest exporter, will prolong production cuts and spread to Middle East producers.

Futures advanced as much as 0.9 percent, extending the biggest quarterly rally since 2009, as troops loyal to Libyan leader Muammar Qaddafi retook control of the oil port of Ras Lanuf and shelled Brega, another energy hub. Libyan oil output fell 72 percent to a 49-year low and OPEC production slid 1.2 percent in March, a Bloomberg News survey showed.

“Libya is the key,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “The market tends to flow with what the rebel forces are doing. When the rebels are getting on top of things, crude oil starts to come under pressure, and as Qaddafi tries to gain control, there’s more concern for the region.”

Crude for May delivery rose as much as 93 cents to $107.65 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Sept. 26, 2008. It was at $107.24 at 8:35 p.m. London time. The contract climbed $2.45 yesterday to $106.72 a barrel and is heading for its second weekly gain.

Futures surged 17 percent from January through March, the strongest quarterly gain since the period ended June 2009. Prices advanced 10 percent in March for a seventh straight monthly gain, the longest consecutive number of increases since the contract started trading in 1983.

Market ‘Catalyst’

New York crude outpaced London’s Brent oil futures, which traded up 39 cents at $117.75 a barrel on the ICE Futures Europe exchange, narrowing the gap between the benchmark contracts. Brent traded at a $10.48 premium to WTI today, compared with a record $19.54 on Feb. 21 and an average $11.82 last month.

Brent rallied 24 percent in the first quarter and 5 percent last month. The contract is up 1.9 percent this week.

Libyan oil production tumbled by 995,000 barrels in March to 390,000 barrels a day, according to the survey of oil companies, producers and analysts. Libya was the third-largest oil producer in Africa before the conflict, pumping 1.59 million barrels a day in January, according to data compiled by Bloomberg.

The Organization of Petroleum Exporting Countries’ crude output dropped 363,000 barrels in March to an average 29.022 million barrels a day, the lowest level since September, as increases from Saudi Arabia failed to make up for the decline in Libyan production. Saudi output rose by 300,000 barrels a day to 9 million, the survey showed.

Qatar and Libya

Qatar has offered to facilitate oil sales from Libya and use the proceeds for humanitarian aid, the British government said in a statement released March 29 after an international conference about Libya in London.

The plan is likely to be stymied by port constraints and payment restrictions, JPMorgan Chase & Co. analysts led by Lawrence Eagles said in an e-mailed note today.

“After weighing all the barriers and pitfalls that might frustrate such a well-intentioned initiative, we count ourselves among the skeptics,” the analysts said. “We continue to forecast a meaningful increase in spot Brent prices and price volatility in the second quarter.”

Rebels withdrew from Ras Lanuf in the face of artillery and rocket attacks after advancing toward Qaddafi’s hometown of Sirte. Many insurgents retreated from Brega, east of Ras Lanuf, to regroup in Ajdabiya farther along the coast, about 100 miles (160 kilometers) from the rebel stronghold of Benghazi, the Associated Press said.

The strife in Libya, holder of Africa’s largest oil reserves, is the bloodiest in a wave of uprisings that has toppled the leaders of Tunisia and Egypt and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.

Prices also advanced as the U.K urged its citizens to leave Yemen ahead of possible violent protests today. Yemen, which borders Saudi Arabia, pumped 298,000 barrels a day in 2009, according to BP Plc’s Statistical Review of World Energy.

To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jane, Ching Shen Lee at jalee@bloomberg.net

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