Singapore: Oil rose on Thursday as investors eyed growing instability in key Middle East oil producing countries, which could signal another threat to global supplies, after Libya’s Muammar Gadaffi ordered airstrikes near Libyan oil facilities.
US crude rose 31 cents to $102.54 at 9:55am, after hitting a high of $102.94. It had settled at $102.23 a barrel in the previous session, settling above $100 for the first time since September 2008.
Prices got a further lift following a drawdown in US oil stocks, data from the US Energy Information Administration showed.
Prices for US oil could extend its gain to $105 per barrel, says Reuters market analyst Wang Tao.
Brent crude rose 46 cents to $116.81 per barrel.
Brent had settled 93 cents higher at $116.35 a barrel, the highest settlement since Aug. 21, 2008, and traded as high as $117.81 during the previous session.
The bloody violence in Libya as Muammar Gadaffi battle for survival had spurred Brent to a 2-1/2 year high near $120 a barrel on Feb. 24.
“The stability of the region has gone through a major shock and the ripples are going to be felt for a while,” said Carl Larry, president of Oil Outlooks and Opinions based in Houston.
“Gadaffi might leave, the rebels could take over, but we still don’t know who will then be in charge of those oil supplies ... and where next are we going to see unrest erupting.”
On Wednesday bombing raids were carried out just outside a Libyan oil terminal, adding fuel to fears the unrest could spill over into other large oil producers in the region.
Libya, a member of the producer cartel Opec, has lost about 700,000-750,000 barrels per day (bpd) of its normal output of 1.6 million bpd as most of the industry’s foreign workers had taken flight after the crisis began according to Shokri Ghanem, the head of the North African producer’s state oil company. .
A drawn-out battle between rebels and pro-Gaddafi supporters in Libya could push crude oil prices above $130 a barrel.
“The market still sees the risk of contagion to neighbouring countries like Algeria which produced 1.2 million barrels per day (bpd) in January,” a BNP Paribas research note said.
“Should Algeria be affected, Opec’s spare capacity stands to be significantly curtailed if it were to meet the additional shortfall in supply.”
The EIA said on Tuesday that prolonged disruption in Libyan oil exports could force the United States to compete more for supplies as Europe buys Algerian crude normally sent to the US market.
Governments in Yemen, Oman, Iran and Iraq have clashed with protesters seeking reforms as popular unrest has spread in the region holding more than 60 percent of the world’s oil reserve.
US crude inventories fell last week as imports dropped, but stocks at the key delivery hub at Cushing, Oklahoma hit a record high, the EIA said in a report on Wednesday.
Domestic crude stocks fell 364,000 barrels to 346.38 million barrels in the week to Feb. 25, government data showed, compared with expectations for a 700,000-barrel build in a Reuters poll of analysts.
Inventories at the key Cushing terminal rose by 1.13 million barrels to a record 38.57 million barrels. Cushing is the delivery point for the New York Mercantile Exchange’s benchmark West Texas Intermediate crude futures.
“Fundamentally we have surplus oil in the United States and most of the OECD countries,” said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.
“It’s very obvious that the market is being driven by a very different dynamic...geo-politics of the Middle East, and that is going to be in play for a long time.”