Brent oil price bounces above $116 on Libya violence

9th March 2011, Comments 0 comments

London Brent oil prices briefly topped $116 per barrel on Wednesday as global supply concerns deepened amid worsening violence in Libya, traders said.

Brent North Sea crude for delivery in April rallied to $116.18, before later pulling back to $115.55, up $2.49 from Tuesday's closing level.

But New York prices slid after news of a larger-than-expected jump in American crude oil inventories. The main contract, light sweet crude for April, known as West Texas Intermediate (WTI), eased 12 cents to $104.90.

"Brent crude oil surged above $116 per barrel, led by renewed concerns about tensions in Libya that forced a shutdown of one of the biggest oil refineries of the country," said Sucden analyst Myrto Sokou.

"However, WTI missed the trend and consolidated around $105 per barrer level, after a bearish EIA weekly report showed large build in the US crude oil stocks, limiting gains for the US oil contract."

The battle for the rebel-held western Libyan town of Zawiyah was undecided Wednesday, escapees reported, while state television said residents were staging a mass demonstration in support of Libyan leader Moamer Kadhafi.

In recent days, oil has spiked to 2.5-year highs amid escalating violence and supply shortfalls in Libya, which is a major producer and exporter of crude.

"Crude oil prices climbed higher ... after renewed tensions in Libya that forced the shutdown one of the biggest oil refineries (Zawiyah refinery) in the country," added Sokou.

Zawiyah, a prosperous dormitory town 40 kilometres (25 miles) west of Tripoli, has been under assault for several days by Kadhafi's forces using artillery and tanks.

Saudi Oil Minister Ali Naimi has downplayed market fears about global shortages from the crisis, saying Tuesday that his kingdom has extra output capacity of 3.5 million oil barrels per day.

"The rally of crude oil prices is not being driven by an actual tightening of supply but rather the fear that the unrest will spread to other oil producing countries," added Commerzbank analyst Carsten Fritsch.

"Should another country on the scale of Libya also exit the market, Saudi Arabia's spare capacities would be likely to fall to a critical level of less than two million barrels a day."

Elsewhere, the US government's Energy Information Administration announced that American crude inventories climbed by a larger-than-expected 2.5 million barrels in the week ending March 4.

But the EIA also revealed that US gasoline or petrol stockpiles sank by 5.5 million barrels.

In addition, distillates -- which include diesel and heating fuel -- dipped by 4.0 million barrels.

© 2011 AFP

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