Oil price slumps under $100 on Japan quake

11th March 2011, Comments 0 comments

New York crude oil dived back under $100 per barrel on Friday as traders bet that a massive earthquake in Japan would slash the country's crude imports.

New York's main contract, light sweet crude for April delivery, fell to $99.01 -- the lowest level since February 25. It later stood at $99.69 a barrel, down $3.01 from Thursday's closing level.

In London midday deals, Brent North Sea crude for April was down a hefty $3.04 to $112.39.

"The demand for oil (in Japan) could be lower, at least temporarily, because of the earthquake," said Commerzbank analyst Carsten Fritsch.

"After China and the US, Japan is the world's third biggest consumer of commodities and is dependent on imports for virtually all commodities," he added.

A devastating 8.9-magnitude earth quake rocked Japan on Friday, killing at least 40 people.

Crude futures also slumped as Saudi Arabia launched a massive security operation in a menacing show of force to deter protesters from a planned a "Day of Rage" to press for democratic reform in the world's biggest oil exporter.

Illegal demonstrations were supposed to start after Muslim Friday prayers at noon but as the mosques emptied there were no signs of rallies, with security men manning checkpoints in key locations across several cities.

Saudi Arabia, with about a quarter of the world's oil reserves, is a linchpin of security in the Middle East and signs of unrest in the kingdom are being nervously monitored by the United States and other major powers.

Ongoing unrest in Libya has almost wiped out production in its key oil sector, slashing output by 1.4 million barrels a day to under 300,000, the head of French oil giant Total said on Friday.

"Oil production in Libya must have fallen to between 200,000 and 300,000 barrels a day maximum," the chief executive of Total, Christophe de Margerie, told reporters in Paris.

"There are about 1.4 million barrels a day less" than normal, since the start of an uprising against Libyan ruler Moamer Kadhafi on February 15 which has led to heavy fighting between his forces and rebels.

Margerie's was the most severe estimate yet of the impact of fighting on oil production. The International Energy Agency (IEA) on Thursday said output had shot "well below" the official Libyan estimate of 500 thousand barrels per day.

"There is no problem of supply to the market," said Margerie however. "We have stocks so there is no risk of a shortage."

Saudi Arabia has said it is committed to the stability of the oil market and to ensuring that oil supplies remain available amid the Libyan unrest.

Oil has spiked to 2.5-year highs in recent days amid the escalating violence and supply shortfalls in Libya.

OPEC on Friday warned that high prices could dampen demand later this year, as the oil cartel upgraded only slightly its 2011 world demand growth estimate.

The Organization of Petroleum Exporting Countries said it was pencilling in world oil demand growth of 1.44 million barrels per day (bpd), or 1.67 percent, to 87.83 million bpd for this year.

That represents only a marginal upward revision from 1.62 percent.

"Oil demand in the first quarter of this year was boosted by cold winter weather in the northern hemisphere," OPEC said in its latest monthly bulletin.

In developing countries, second quarter oil demand "is expected to maintain its healthy level, achieving similar growth to that of the first quarter," it said

Nevertheless, "while the colder-than-normal winter has strengthened oil demand, high oil prices could dampen consumption over the coming months if current price levels persist for an extended period," the cartel added.


© 2011 AFP

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