London: Oil prices turned positive on Tuesday as Moammar Gadhafi’s troops halted a rebel advance, raising doubts among investors over how quickly the conflict in OPEC (Organization Of Petroleum Exporting Countries) member Libya could be resolved.
Expectations of a relatively swift restoration of Libyan oil to the market had been building after the rebels mounted a two-day charge westwards, retaking oil towns, but momentum stalled on Tuesday as they hit fierce opposition around Nawfaliyah, 120km east of Sirte. Government forces in the West launched fresh attacks on rebels in Misrata, but US ambassador to the United Nations Susan Rice said the Obama administration had not ruled out arming Libya’s rebels.
Brent crude for May delivery was 14 cents higher at $114.94 by 1430 GMT, after earlier falling more than a dollar. US light crude was 11 cents up at $104.09.
In Japan, plutonium was found in soil at the Fuskushima nuclear complex, raising concerns it had breached the containment system of reactor No. 3, undermining hopes the workers were getting the plant under control.
Analysts said Japan’s lack of progress in containing the nuclear crisis was likely to delay the world’s third largest oil user’s return to full industrial strength, but the downside for oil prices could be limited by unrest in the Middle East.
“We have two factors that are countervailing,” said Harry Tchilinguirian, analyst at BNP Paribas SA.
“There is a risk premium in the Middle East built in on risk of further contagion. On the other hand, we have the fact Japan is a major component of the global supply chain, so the potential for a price correction in the second quarter remains.”
Yemeni protesters demanded the imminent removal of President Ali Abdullah Saleh on Tuesday and blamed him for violence that has raised US fears of chaos that could be exploited by militant groups.
Volume for US crude fell on Monday to the lowest this year, with trade limited in part, analysts said, by concern about the prognosis for Japan.
Barabara Lewis, Florence Tan, Alejandro Barbajosa, Randy Fabi contributed to this story.