Oil Rises to 28-Month High on Libya, Middle East Supply Concern
Oil rose to its highest in more than two years as Libya’s violent uprising threatened to disrupt exports from Africa’s third-biggest supplier and spread to other crude-producing nations in the Middle East.
Futures gained as much as 0.7 percent after Libyan leader Muammar Qaddafi vowed to fight a growing rebellion until his “last drop of blood.” London-traded Brent advanced after settling at the highest since September 2008. The Organization of Petroleum Exporting Countries will boost output if there is a supply shortage, Saudi Arabian Oil Minister Ali al-Naimi said yesterday.
“It’s still the risk that this contagion spreads to Saudi Arabia or Iran,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “OPEC could step in and increase production to offset that if they needed to.”
Crude for April delivery rose as much as 66 cents to $96.08 a barrel in electronic trading on the New York Mercantile Exchange, and was at $95.25 at 9:10 a.m. London time. The contract yesterday increased $5.71 to $95.42, the highest since October 2008. Futures are up 22 percent from a year ago.
The March contract, which expired at the close of floor trading yesterday, surged $7.37, or 8.6 percent, to $93.57.
Brent oil for April settlement climbed as much as $1.72, or 1.6 percent, to $107.50 a barrel, on the London-based ICE Futures Europe exchange. Yesterday, it gained 4 cents to $105.78, the highest settlement since Sept. 22, 2008.
Saudi Arabia, the largest oil exporter and the biggest producer in the OPEC, has 4 million barrels a day of spare capacity, al-Naimi said at a press conference at the ministerial meeting of the International Energy Forum in Riyadh. All the world’s producers, including Saudi Arabia, could pump an additional 6 million barrels, he said.
Libya, which pumps 1.6 million barrels a day, is the ninth- largest producer in 12-nation OPEC, exporting most of its crude and fuels across the Mediterranean to Europe. The nation has the largest reserves in Africa.
“WTI will probably reach $100 a barrel, and I don’t think it will exceed $110 at all, unless the unrest spreads to the Gulf,” Ong Eng Tong, a consultant with Hamburg-based oil trader Mabanaft GmbH, told Rishaad Salamat on Bloomberg Television’s “On the Move” program. “Crude is still not short at this moment.”
The Paris-based International Energy Agency said in a statement yesterday on its website that “the IEA stands ready, as always, to make oil available to the market in the event of a major supply disruption if alternative supplies cannot be made available via normal market mechanisms.”
Oil in New York has entered a “buying level” on technical charts that may trigger a rally to as high as $104 a barrel by next month, according to Societe Generale SA. Prices will extend gains if the market settles above $95.80, according to Stephanie Aymes, a cross-commodity technical analyst at Societe Generale in London.
An Energy Department report tomorrow may show U.S. crude stockpiles rose for a sixth week, matching the longest streak of gains since May, according to a Bloomberg News survey. Supplies probably increased 1.13 million barrels in the seven days ended Feb. 18 from 345.9 million a week earlier. The industry-funded American Petroleum Institute will publish its own data today.
New York crude’s relative strength index, a measure of how fast prices have risen or fallen, climbed to the highest in four months as oil rallied. The RSI was 69.38 today, compared with 44.29 on Feb. 18, according to data compiled by Bloomberg. A reading of 70 or more signals to some traders that a market is “overbought” and may drop. Brent’s RSI was 69.31.
Libya is the latest nation to be rocked by protests ignited by the ouster of Tunisia’s president last month and fanned by the Feb. 11 fall of Egyptian President Hosni Mubarak.
Countries in North Africa and the Middle East were responsible for 36 percent of global oil output and held 61 percent of proved reserves in 2009, according to BP Plc, which publishes its Statistical Review of World Energy each June.
To contact the reporter on this story: Ben Sharples in Melbourne at firstname.lastname@example.org
To contact the editor responsible for this story: Clyde Russell at email@example.com