Oil prices rise on Libya, Middle Ease unrest

23rd March 2011, Comments 0 comments

World oil prices advanced Wednesday owing to escalating unrest in Libya and the Middle East, traders said as they awaited energy inventory data from the United States, the world's biggest oil consumer.

Brent North Sea crude for delivery in May climbed 49 cents to $116.19 a barrel in London trade.

New York's main contract, light sweet crude for May, gained 54 cents to $105.51 per barrel.

"The issues of Libya and Yemen have been driving prices of crude oil up, although Yemen is a small exporter and Libya has been more significant," said John Vautrain of Purvin and Gertz energy consultancy.

"The situation is probably going to last for a while," Vautrain told AFP.

Air strikes against Libya by US, British and French fighters continued to press the markets after an uprising last month forced the closure of more than three-quarters of the country's crude production.

Oil-rich Libya was producing 1.69 million barrels a day before the unrest, according to the International Energy Agency. It is now producing 400,000 barrels a day.

Popular uprisings have already toppled the leaders of Tunisia and Egypt and are are now threatening the rulers of Libya and Yemen while there have also been anti-government movements in Bahrain, Iran, Saudi Arabia, Syria and Yemen.

"The air strikes against Libya over the weekend by Western powers could lead to unchartered fluctuations in oil prices," said Hank Lim, a senior research fellow at the think-tank Singapore Institute of International Affairs.

He added that the conflict "could lead to the unravelling of events in Yemen, Bahrain and even Saudi Arabia."

Political and social reforms in those countries would have a positive economic impact in the oil-rich region in the long term "if they are carried out in a measured manner," he said.

He added however that "under the present volatile environment, the demand for reforms are often manipulated by radical elements."

The spike in oil prices could seriously impact advanced economies by next year, according to a study by the Organisation for Economic Cooperation and Development published Tuesday.

It said that if the $25 per barrel increase in prices since the start of the year is sustained, "activity could be reduced by about 0.5 percentage points in the OECD area by 2012 and inflation could rise by 0.75 percentage points".

The US government's Department of Energy was meanwhile due to publish the latest levels of its crude oil stockpiles at 1430 GMT.

© 2011 AFP

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