Crude Oil Heads for Its Third Weekly Gain as Unrest Spreads to Middle East
Oil rose, heading for a third weekly gain, as unrest in Libya renewed concern supply disruptions may spread to the Middle East while signs of U.S. economic recovery stoked speculation fuel demand will increase.
Futures are 5 percent higher this week, after surging to the highest in 29 months, as Libyan forces loyal to Muammar Qaddafi continued attacks on rebels and protests spread to Iran and Oman. Oil climbed as much as 0.9 percent today before a report that will probably show U.S. employers added more workers last month.
“It’s fear and the expectation that this unrest could spread” that has driven oil higher, Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today. Economic data from the U.S. this week has been “positive,” he said.
Crude for April delivery rose as much as 94 cents to $102.85 a barrel in electronic trading on the New York Mercantile Exchange, and was at $102.66 at 4:14 p.m. in Singapore. Yesterday, the contract slipped 32 cents, or 0.3 percent, to $101.91, the first decline in three days. Prices are 28 percent higher than the past year.
Brent crude for April settlement was at $115.85, up $1.06, on the London-based ICE Futures Europe exchange. It slid $1.56, or 1.3 percent, to $114.79 yesterday.
Technical indicators showed the market was “overbought” for a fourth consecutive day. Crude’s 14-day relative strength index rose to 74.6 from 73.5 yesterday, Bloomberg data showed. A reading of 70 typically indicates prices are set to retreat, while 30 suggests they may rise.
Oil fell as much as 2 percent yesterday after Venezuelan President Hugo Chavez offered to mediate the conflict in Libya, which has cut supplies from the Organization of Petroleum Exporting Countries’ ninth-biggest producer. The plan was rejected by Libyan opposition leaders.
Fighting has cut crude production in the North African country by as much as 1 million barrels a day, the International Energy Agency said. Libya, Africa’s third-largest producer, pumped 1.6 million barrels a day in January, according to Bloomberg estimates.
Demonstrations have toppled leaders in Tunisia and Egypt, while there have been protests in countries including Iraq, Iran, Yemen and Oman OPEC’s biggest oil producer. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
Prices closed at the highest since September 2008 on March 2 after Iranian protesters clashed with security forces in Tehran while demonstrations escalated in Oman. Iran is the second biggest producer in OPEC and Oman is the largest Middle East producer outside the group.
U.S. Treasury Secretary Timothy F. Geithner said yesterday that the world has enough oil available to soften the blow of any disruption. Saudi Arabia is “ready to supply incremental change in demand,” to cover any shortfall from Libya, Saudi Arabian Oil Co.’s Chief Executive Officer Khalid Al-Falih said Feb. 28.
Oil at $100 a barrel will have a “bad impact” on the global economic recovery, especially on emerging economies, IEA Executive Director Nobuo Tanaka said in an interview with Andrea Catherwood on Bloomberg Television yesterday. The IEA is the Paris-based adviser to 28 nations on energy issues.
Prices also rose on signs the U.S. economy is gaining strength and fuel demand is recovering. Service industries expanded in February at the fastest pace since 2005 and fewer Americans unexpectedly filed claims for jobless benefits, reports showed March 3.
A U.S. government jobs report today will probably show employers added more workers last month, according to a Bloomberg News survey of economists, bolstering confidence growth in the world’s biggest economy is accelerating. Applications for unemployment benefits fell by 20,000 to 368,000 last week, beating estimates, Labor Department data showed yesterday.
U.S. crude inventories dropped by 364,000 barrels to 346.4 million in the seven days ended Feb. 25, the first decline in seven weeks, a March 2 report from the Energy Department showed. A 750,000-barrel gain was projected, according to the median of analyst estimates in a Bloomberg News survey.
Crude’s gains are inflating the cost of refined oil products. Gasoline prices are up 11 percent this week, heading for the biggest weekly gain since Oct. 16, 2009. Motor fuel for April delivery advanced as much as 2.21 cents, or 0.7 percent, to $3.0483 a gallon on the New York Mercantile Exchange today.
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