LIBYA’S ESCALATING violence represents the biggest threat to global oil supply since the invasion of Iraq eight years ago as political unrest sweeping the Middle East centres on an Opec (Organisation of Petroleum Exporting Countries) exporter.
Brent crude rose 3.2 per cent in the past two days on London’s ICE Futures Europe exchange as fighting erupted in Libya, compared with a 2.7 per cent advance during the previous two weeks when Egyptians held anti-government protests across the country.
The Libyan clashes put at risk exports from one of Africa’s three biggest oil suppliers for the first time since uprisings began in Tunisia in December.
Iraq’s daily oil output slumped to 140,000 barrels from 2.5 million barrels in the two months ending April 2003 after the US-led invasion of the country. Iraqi output took five years to fully return to pre-invasion levels.
Libya pumps 1.6 million barrels a day. “There are some similarities in the current situation with the lead-up to the last Gulf War in Iraq in the sense the oil market is pricing in the potential for outages in crude supply,” said Harry Tchilinguirian, the London-based head of commodity-markets strategy at BNP Paribas SA, France’s largest bank. “The difference today is that there is no clear visibility on the possible duration of events in the Middle East or their geographic scope.”
Crude futures for April delivery advanced as much as $4.52, or 4.7 per cent, to $99.94 a barrel on the New York Mercantile Exchange, and was at $99.90 at 12:31pm local time. London- traded Brent climbed to $111.85 a barrel. Yesterday it closed at $105.78 a barrel, the highest settlement since September 22nd 2008.
Libya is the ninth-largest producer in the 12-nation Opec, exporting most of its crude and fuels across the Mediterranean to Europe.
The nation pumps about 3.3 percent of world output and has the largest reserves in Africa.
“The unrest will hold the oil price high into the second quarter, Brent will stay above $100 in the coming weeks,” said Axel Herlinghaus, a senior commodities analyst at DZ Bank AG in Frankfurt. – (Bloomberg)
