Oil at new high on Libyan worries
Singapore - US crude futures climbed to a two-and-a-half year peak on Wednesday on concern that unrest in Libya could spread to other top oil producers in the region and cut more output.
Violent clashes in Libya have resulted in at last three oil companies halting output in Africa's third-largest producer. Libya pumps 1.6 million barrels per day (bpd), or nearly 2% of global supply.
The disruptions mark the first reduction in oil supply stemming from a wave of protests that have swept through the oil-producing Middle East and North Africa. Investors fear for the potential impact on the flow of oil from top exporter Saudi Arabia if it suffers similar unrest.
US crude rose as high as $96.08 a barrel, the highest level since October 2008. By 05:55, the contract had trimmed gains to trade at $95.70, up 28 cents on the day.
Brent crude rose 78 cents to $106.56 a barrel. On Monday, Brent hit a two-and-a-half year high of $108.70.
"Even if Libya completely shuts down, there isn't a supply issue. But the (US crude) could go to $100, given the potential for this contagion to spread to Saudi Arabia," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
To date, protests in Saudi have been low key. But majority Shi'ites in neighbouring Bahrain are protesting against the Sunni government and there is concern this could spill over to the Shi'ite minority living in Saudi Arabia's oil-producing eastern province.
A pipeline pumping Libyan gas to Italy was also closed, and operations at Libya's export terminal operations disrupted. Libyan leader Muammar Gaddafi has refused to step aside despite the growing revolt and threatened tougher action against protesters in a defiant speech on Tuesday.
International Energy Agency (IEA) chief economist Fatih Birol said on Tuesday that oil prices were in the danger zone and could rise further if turmoil continues in the Middle East.
"The global economy is more fragile now than it was in 2008. Growth has been driven by stimulus packages and austerity measures. I don't see it being able to absorb a rise to $140 like it did two years ago," Barratt said.
Brent crude has risen more than 13% so far this year. US crude is up over 2% on the year, but is over $50 below its 2008 high of $147.27.
"(Brent) prices have broken through the $105 resistance, and if it breaks $110, it could easily move to $120," said Ken Hasegawa, a commodity derivatives manager at Newedge brokerage in Tokyo.
No more crude from Saudi
Top exporter Saudi Arabia on Tuesday stopped short of pouring more oil on to markets, telling visiting consumer nations prices were driven by fear.
The kingdom could ramp up its oil production enough within one month to replace all of Libya's crude exports if growing strife in the African nation cuts off its oil shipments, a senior US government energy official said on Tuesday.
Saudi Arabia supplies around 10% of the world's oil, but also holds most of the world's spare capacity.
It is the only producer able to respond quickly with large volumes of oil to compensate for a serious supply outage.
IEA member states would consider releasing oil from their emergency stocks if supplies were disrupted as a result of continuing turmoil in the Middle East, Birol said.
The IEA is adviser to 28 industrialised nations on energy policy.
Asian stocks fell on Wednesday, following Wall Street's worst performance since August on concerns over the turmoil in Libya.
In spite of what some people are saying, in SA we need to look, as a matter of urgency at our OWN fuel alternatives, one of which is the idea of "Fracking" in the Karoo Shale beds, and then to tap into our coal reserves without "mining" the coal - the technology is there. The Nuclear alternative is yet another, in spite of the Green Lobby being against it.
Whats wrong with this world? I thought gone wre the days of selfishness and dictatorship. Who do lead tommorrow if you slaughter your own unhappy people? I mean do we really need this madness?