Oil climbs higher on Libya conflict

Oil climbs higher on Libya conflict

London: Crude oil rose by more than $1 on Friday, with Brent hovering around $116, as fighting in Libya intensified with fresh reports of air strikes, and on protests in Saudi Arabia’s oil-producing Eastern Province.

By 3:25pm, Brent crude futures for April delivery were up $1.14 to $115.93 a barrel, after earlier touching $116.20. US crude futures for April rose 68 cents to $102.59 a barrel, but earlier rallied by over $1 to $103.03.

Investors and traders have been nervously tracking the civil unrest in North Africa and the Middle East for any sign that Saudi Arabia, Opec’s leading oil producer, would be affected.

On Thursday Saudi Shi’ites staged protests in two towns in its oil-producing Eastern Province, demanding the release of prisoners they say are being held without trial.

In Libya, rebels calling for air strikes to set up a “no-fly" zone came under attack by a warplane for a third day as Muammar Gaddafi tried to loosen the opposition’s expanding grip on a key coast road.

Eastern-based rebels told Reuters they were open to talks only on Gaddafi’s exile or resignation following attacks on civilians that have brought global condemnation and triggered a probe at the war crimes court.

Commerzbank analyst Carsten Fritsch said nobody now expected Venezuelan President Hugo Chavez’s proposals for an international panel to negotiate an end to the turmoil to work.

“The rebel leader has rejected the plan and the continued air attacks by Gaddafi’s forces on the rebel strongholds give little reason for the rebels to return to the table," he said.


The market is also focusing on the Shi-ite protests in Saudi Arabia, although Christophe Barret, global oil analyst at Credit Agricole Corporate and Investment Bank, said he thought the risks were exaggerated.

“Saudi Arabia is the main risk in the region - it has all the spare capacity, and if there is unrest and production disruption then it means an explosion in oil prices. But I think the risk is an exaggeration," he said.

He argued there were always problems between the Shi-ites and the Sunnis. “I don’t think it will go like Libya, but the Eastern Province is a significant oil producing province of Saudi Arabia so that is why everyone is looking at it."

Unrest continues in other parts of the region. Shi’ite Muslim rebels in northern Yemen said the military had fired rockets at their anti-government protests.

In Bahrain several people were reported hurt in fighting between Sunni and majority Shi’ite Muslims.

Libya’s oil output has fallen to 700,000-750,000 barrels per day (bpd) from normal levels of 1.6 million bpd as most foreign oil workers have taken flight, according to Shokri Ghanem, the head of Libya’s state-owned oil company.

The US dollar traded flat against a basket of currencies as the euro strengthened following the European Central Bank’s hawkish comments about rate rises on Thursday. A weaker dollar is supportive for oil prices.

The market is looking to US non-farm payrolls data due later on Friday, which are expected to have risen in February after being held down by extreme winter weather in January.

Employment is expected to have increased by 185,000, which would be the largest gain in almost a year.

“If we see some strong numbers, that could give some further support," said Commerzbank’s Fritsch.