US CRUDE prices jumped to their highest since September 2008 yesterday and Brent rose above $116 a barrel on concern that unrest in Libya will spread to other North African and Middle East energy exporters, curbing shipments.
Oil rose 2.5 per cent as Libyan leader Muammar Gadafy sent troops to recapture towns in the western part of the country and prepared to quash protests in the capital Tripoli and clashed with rebels near the major oil terminal of Ras Lanuf.
Investors watched for extended supply disruptions, weighing the threat that Libya’s key oil sector could get embroiled in the revolt, as well as the possibility that spreading protests and unrest could affect other producers in the region, especially top Opec exporter Saudi Arabia.
Protests in Yemen, Oman and Bahrain have all helped fuel uncertainty about the region after protests toppled regimes in Egypt and Tunisia.
“Unrest in Libya continues to fuel concerns about supplies,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based broker.
“We’re facing a weekend amid a drumbeat of instability. Nobody wants to be short when there could be a major disruption over the next two days.”
Crude oil for April delivery increased $2.51 to $104.42 a barrel on the New York Mercantile Exchange, the highest settlement since September 26th, 2008. The contract rose 6.7 per cent this week, the third straight advance, and is up 30 per cent from a year ago.
Brent crude for April settlement rose $1.16, or 1 per cent, to $115.95 a barrel on the London-based ICE Futures Europe exchange. The contract is up 3.4 per cent this week and is heading for the sixth straight weekly gain.
US crude prices were well above the $81.96 200-day moving average and also the $90.81 50-day and $97.72 10-day moving averages, according to Reuters data.
Brent’s premium to its US counterpart was just above $12 a barrel, down about 77 cents from the previous session and well below last week’s record $16.91.
Brent’s price rise has been stronger because Europe and the Brent market is seen as more vulnerable to supply disruptions from Libya and the region.
Brent may advance past $119 a barrel as prices continually surge above ranges and moving averages, according to technical analysis by Glen Ward, head of retail derivatives at London Capital Group Holdings Plc. The nine-day, 14-day and 40-day moving averages “are all pointing north”, Mr Ward said.
“Tension in the Middle East is like a runaway train,” said Michael Hewson, an analyst at CMC Markets in London. “Once it starts, it’s very difficult to stop. And if there is a danger that it impacts the supply chain, people will understandably get nervous.”
The International Energy Agency said one million barrels per day (bpd) of Libya’s oil output was shut, lifting its estimate to the higher end of the bracket it gave on Wednesday when it pegged shut output at between 850,000 bpd and one million bpd.
In Saudi Arabia’s neighbouring Yemen, President Ali Abdullah Saleh rejected an opposition plan for him to transfer power this year, as demonstrations swelled into hundreds of thousands.
“Everyone in the market is very concerned about the situation in the Middle East,” said Phil Flynn, vice-president of research at PFGBest in Chicago. “The Day of Rage protest called for next week in Saudi Arabia will keep us on edge.” – (Bloomberg/Reuters)
