Oil Trades Near 29-Month High in New York on Middle East Supply Concern

Oil traded near its highest closing price in 29 months in New York on concern that the unrest curbing crude exports from Libya will spread to the Middle East.

Crude futures gained as much as 1 percent as Libyan rebels braced for renewed clashes with forces loyal to leader Muammar Qaddafi. Saudi Arabia’s benchmark stock index extended its biggest plunge in two years on concern disturbances may extend to the kingdom, the biggest supplier in the Organization of Petroleum Exporting Countries. The U.S. Energy Department will release weekly supply data today.

“With the shut-downs in Libya and possibility for more in other producing areas, the potential for a rise to $130, $140 is of course there,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “You can’t rule out that we might see this same unrest in Saudi Arabia.”

Oil for April delivery gained as much as $1.01 to $100.64 a barrel in electronic trading on theNew York Mercantile Exchange, and was at $100.54 at 1:27 p.m. London time. Yesterday, the contract rose 2.7 percent to $99.63, the highest since close September 2008. Prices are 25 percent higher compared with a year ago.

Brent crude for April settlement was at $116.06 a barrel, 64 cents higher, on the London-based ICE Futures Europe exchange. Yesterday, it climbed $3.62, or 3.2 percent, to $115.42, the highest settlement since Aug. 27, 2008.

Gasoline surged to the highest level in New York since August 2008 yesterday, with the April contract gaining as much as 10.6 cents to $3.0179 a gallon.

Record Prices

Prices in the U.K. surged past 130 pence a liter ($8 a gallon) yesterday for the first time, according to the Automobile Association, the nation’s largest motoring organization. On average, the pump price of gasoline was 130.03 pence a liter, while diesel averaged 135.44 pence.

A U.S. Energy Department report today may show crude inventories rose 750,000 barrels last week from 346.7 million barrels, according to the median of 17 analyst estimates in a Bloomberg News survey. It would be the seventh week of gains. The industry-funded American Petroleum Institute said yesterday that supplies fell 1.1 million barrels.

Fighting in Libya may have shut as much as 850,000 to 1 million barrels a day of the North Africa’s output, according to the International Energy Agency.

Demonstrators clashed with security forces in Tehran yesterday. Iran’s Foreign Ministry said issues related to opposition figures in the country are “internal affairs,” without commenting on allegations by dissidents that authorities had detained the main opposition leaders Mehdi Karrubi and Mir- Hossein Mousavi. Iran pumped 3.7 million barrels a day in February, according to Bloomberg estimates.

Oman Protests

In Oman, the largest Middle Eastern producer outside of OPEC, protesters blocked a highway linking the northern city of Sohar to the capital Muscat yesterday as the army set up checkpoints around Sohar and inspected vehicles. The country pumped 885,600 barrels of oil a day in January, according to data reported by the state-run Oman News Agency.

Riots from Morocco to Bahrain have toppled leaders in Tunisia and Egypt and there have been protests in Yemen, to the south of Saudi Arabia, the world’s biggest crude exporter. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and 20, according to Human Rights Watch.

Saudi Arabia’s Tadawul All Share Index dropped 2.6 percent today, taking declines this week to 14 percent.

Saudi Oil

Prices will probably decline to below $100 a barrel as Saudi Arabia releases supply from its reserves and demand drops from elevated December levels, Andrew Garthwaite, an analyst at Credit Suisse Group AG, said in a note today. The rise in prices is “manageable,” he said.

Saudi Arabian Oil Co.’s Chief Executive Officer Khalid Al- Falih this week said the kingdom is “ready to supply incremental change in demand,” to cover any shortfall from Libya. Saudi Arabia pumped 8.43 million barrels a day of oil in February, according to estimates compiled by Bloomberg.

The kingdom offered two European refiners additional cargoes of Arab Light crude for loading in March to make up for the loss of Libyan oil, two officials involved in the negotiations said.

One refiner turned down the offer as the quality of the crude didn’t meet its requirements while the other has yet to make a final decision, said the officials, who asked not to be identified because the information is confidential.

(Source: http://www.bloomberg.com/news/2011-03-02/oil-trades-near-29-month-high-in-new-york-on-middle-east-supply-concern.html)