Brent crude rose for a second day today to surpass $116 after forces loyal to Libyan leader Muammar Gadafy bombed oil industry infrastructure, inflicting longer-term damage on the country's exporting capacity.
Col Gadafy's forces struck an oil pipeline leading to Es Sider and dropped bombs on storage tanks in the Ras Lanuf oil terminal area in the eastern section of Libya that is rebel-controlled.
"The large explosions and enormous columns of smoke from storage tanks and other facilities in Ras Lanuf, close to the Es Sider terminal, are perhaps more than merely symbolic," Barclays Capital oil analysts headed by Paul Horsnell said.
"They represent a final fading of any residual realistic hope that the outage of Libyan oil could prove to be anything other than prolonged."
Libya turned away an oil tanker hired by Chinese oil trading firm Unipec to lift 2 million barrels of Es Sider crude, a trading source said today.
Brent crude for April gained 15 cents to $116.09 a barrel at 8am after soaring almost $3 yesterday, or 2.5 per cent, from as low as $112.16. They reached a 2.5-year high of $119.79 on February 24th.
US crude gained 44 cents to $104.65, after touching a 2.5 year peak of almost $107 earlier this week.
Yesterday, US crude fell after stockpiles at the pricing point for benchmark West Texas Intermediate at Cushing, Oklahoma, surged 1.7 million barrels to a record of almost 40.3 million barrels, according to the US Energy Information Administration.
That caused the discount of WTI to European marker Brent to widen to almost $12 a barrel from about $8 the previous day.
Total US crude inventories rose 2.5 million barrels last week, the EIA said. The weekly inventory data also showed drawdowns for gasoline and distillates were bigger than expected, reflecting improving demand.
Confirming previous non-Libyan estimates, Shokri Ghanem, chairman of Libya's National Oil Corp, said that production has been cut to about half a million barrels per day from 1.6 million bpd (barrels per day) by the war, as many foreign and local workers have left oil fields.
Libyan oil trade has been paralysed as banks decline to clear payments in dollars due to US sanctions, though Austrian energy group OMV said it had been buying small amounts of Libyan crude oil and would continue to do so.
A Libyan insurgent said rebels had retaken the heart of the closest city to the capital from forces loyal to Col Gadafy yesterday evening in some of the fiercest fighting in almost three weeks of clashes.
Saudi Arabia has increased production to 9 million bpd, almost 1 million bpd above its current Opec target. The kingdom says it currently holds spare capacity of 3.5 million bpd.
Still, an Opec delegate said yesterday that the group saw no need for an emergency meeting to discuss raising output.
The US believes new sanctions should be put on Iran and existing ones more tightly enforced after talks on reining in Tehran's nuclear program failed in January, a US official said yesterday.
China is confident that it can hold inflation to an average of 4 per cent this year, the government's statistics chief said yesterday, but a central bank adviser warned that soaring commodity costs were adding to upside risks.
China's crude oil imports in February rose 7.8 per cent from the year-ago level to the third highest on record on a daily basis, reaching 5.2 million bpd as refiners ramped up imports despite a demand lull during the holiday month.
Reuters
