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Brent at 2-1/2 year high on escalating Libyan unrest

Brent at 2-1/2 year high on escalating Libyan unrest
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First Published: Mon, Feb 21 2011. 05 52 PM IST
Updated: Mon, Feb 21 2011. 05 52 PM IST
London: Brent crude oil futures rose to a 2-1/2 year high over $105 a barrel a barrel on Monday, and US prices rallied by over $3 as clashes in Libya threatened to disrupt oil flows from the OPEC member.
Brent futures were up $1.73 at $104.25 a barrel by 1204 GMT after breaking above last week’s peak of $104.52, its highest since September 2008.
US crude oil prices were up by $3.05 at $89.25 a barrel around the same time.
One of the bloodiest revolts in the region hit the oil exporter as scores were killed in anti-government protests, army units defected to the opposition and long-time leader Muammar Gaddafi’s son vowed to fight to the last man standing.
The leader of the Al-Zuwayya tribe in eastern Libya said oil exports to the West would be cut off unless authorities stopped violence against protesters.
“Libya is a significant producer and exporter of good quality crude oil, and threats by the tribal leader to stop production is worrisome,” said Christophe Barret, an oil analyst at Credit Agricole Corporate and Investment Bank.
Libya produced 1.58 million barrels per day in January, and major disruptions in the oil-rich North African country would present serious strategic challenges for Western governments.
Italy looks set to bear the brunt of a fall-out if Libya descends further into chaos, but Eni Societa per Azioni on Monday said output there had proceeded normally over the past 24 hours.
Oil prices extended their rally on Monday after striking workers halted production at Libya’s Nafoora oilfield, Al Jazeera television reported on Monday, without giving further details.
European oil and gas companies have evacuated staff and suspended drilling preparations in Libya as violence spreads across the north African country.
A wave of popular unrest in North Africa and the Middle East has already toppled long-time leaders in Tunisia and Egypt, and traders are watching events carefully in other members of the OPEC group for signs of escalating tension.
“The biggest concern is current contagion spreading to Saudi Arabia,” said Michael Hewson, a market analyst at CMC Markets, adding that “markets hate uncertainty and will act first, think later”.
Saudi Arabia fears that unrest in Bahrain, where majority Shi’ites are protesting against the Sunni government, might spread to its Shi’ite minority, who mostly live in the eastern province, the source of Saudi oil wealth.
Bahraini protesters camped out in Manama’s Pearl Square and pressed demands for a new government on Monday. “In the eyes of the people the government has already fallen,” said Amir Ahmed, 38, a government oil sector employee.
Elsewhere, in OPEC’s second-largest producer Iran, the daughter of former president Akbar Hashemi Rafsanjani was arrested on Sunday for taking part in a banned opposition rally, the official IRNA news agency reported.
In Yemen, President Ali Abdullah Saleh warned protesters demanding an end to his 32-year rule that they could not achieve their goal through “anarchy and killing”, after nationwide unrest, which has killed 12 people since Thursday.
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First Published: Mon, Feb 21 2011. 05 52 PM IST
More Topics: Markets | Crude Oil | Libya | OPEC | Brent futures |