Oil shoots toward $102 on Libya supply disruption

[February 24, 2011]  SINGAPORE (AP) -- Oil prices zoomed to nearly $102 a barrel Thursday in Asia as chaos in Libya disrupted crude supplies from the OPEC nation, and traders worried instability could spread to oil-rich countries in the Middle East.

Benchmark crude for April delivery was up $3.55 at $101.65 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract, which has soared about 20 percent since last week, jumped $2.68 to settle at $98.10 on Wednesday.

In London, Brent crude for April delivery vaulted $5.74 to $116.99 a barrel on the ICE Futures exchange.

Libyan leader Moammar Gadhafi's grip on power slipped further as rebels took control of much of the eastern part of the country and advanced around Tripoli, the capital. Two air force pilots parachuted out of their warplane and let it crash into the eastern Libyan desert rather than follow orders to bomb an opposition-held city.

The mayhem has disrupted crude exports from Libya, which produces about 1.6 million barrels of crude per day and has the biggest oil reserves in Africa.

French oil giant Total said it started to wind down its operations, which average of 55,000 barrels per day last year. Libya's biggest oil producer, Italy's Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations. Germany's Wintershall said it shut down operations that produced up to 100,000 barrels of oil per day.

Evacuations of oil company employees and their families continue.

"It's becoming apparent that a large block of the country's output will be curtailed as various international oil companies evacuate staff from the country," Ritterbusch and Associates said in a report. "The futures market may be forced to price in a major loss of Libya's output for at least a few weeks."

"Continued instability in the Middle East and North Africa will likely keep this bull move alive into the spring," Ritterbusch said. "This still feels like a market that is far from achieving a top."

The speed and scale of protests in the Arab world this year -- which brought down long-standing rulers in Tunisia and Egypt and sparked anti-government protests in Yemen, Bahrain, Algeria, Morocco and Jordan -- have traders worried the upheaval could spread to oil giants Saudi Arabia and Iran.

"Beyond Libya, there are a number of countries whose stability is absolutely critical to Western supplies," Cameron Hanover said in a report. "Obviously, that starts with Saudi Arabia, but the United Arab Emirates, Kuwait, Qatar and even Iraq are on the list."

"With unrest all around them, is there any really strong reason to believe that the emirates or Kuwait or even the (Saudi) kingdom itself can remain oases in this swirling, engulfing sandstorm."

Analysts estimate the turmoil in Libya has added $15 to the price of oil, and prices will likely quickly drop back down should Gadhafi resign and fighting stop.

"Libya should be both the first and the last of the major producers to see any significant disruption to oil output, allowing the risk premium to fall," said Capital Economics, which expects Brent to fall to $85 by the end of the year.

In other Nymex trading in March contracts, heating oil rose 9 cents to $2.99 a gallon and gasoline gained 10.4 cents to $2.82 a gallon. Natural gas futures were down 4.5 cents at $3.86 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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