Oil Reaches 30-Month High on Strong China Data, Libyan Conflict

Oil rose to a 30-month high in New York as economic data from the U.S. and China spurred hope of growing demand in the world’s two biggest oil users, while fighting in Libya fanned concern that output cuts may spread.

Futures advanced as much as 0.9 percent, extending the biggest quarterly rally since 2009, as troops loyal to Libyan leader Muammar Qaddafi retook control of the oil port of Ras Lanuf and shelled Brega, another energy hub. The U.S. economy added more jobs than forecast in March and the unemployment rate unexpectedly declined to a two-year low. In China, manufacturing growth accelerated for the first time in four months.

“You got the perception of further oil demand from China at the time we got the unrest in the Middle East,” said Glen Ward, head of retail derivatives at London Capital Group. “This is making the market firm.”

Crude for May delivery rose as much as 93 cents to $107.65 a barrel in electronic trading on theNew York Mercantile Exchange, the highest front-month price since Sept. 26, 2008. It was at $107.36 at 1:48 p.m. London time. The contract climbed $2.45 yesterday to $106.72 a barrel and is heading for its second weekly gain.

Brent oil for May settlement traded up 30 cents at $117.66 a barrel on the ICE Futures Europe exchange in London, narrowing its premium to New York-traded West Texas Intermediate to $10.28 from $10.64 yesterday. The spread reached a record $19.54 on Feb. 21 and averaged $11.82 last month.

U.S. Jobs Report

U.S. employment data showed demand recovery may be gathering speed. Payrolls increased by 216,000 workers last month after a revised 194,000 gain the prior month, the Labor Department said today in Washington. Economists had projected a March gain of 190,000, according to the median estimate in a Bloomberg News survey. The jobless rate dropped to 8.8 percent from 8.9 percent in February, the fourth straight decline.

“It’s certainly indicative of continuing improvement in the labor market, with two months in a row of really solid private payrolls,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.

China’s Purchasing Managers’ Index rose to 53.4 in March from 52.2 in February, the China Federation of Logistics and Purchasing said in a statement on its website today. Readings above 50 indicate expansion.

“The latest increase represents a rise in the oil sensitive manufacturing sector after three months of declines suggesting that oil demand is likely to begin to rise again and China’s inflation fighting may slowly coming to an end,” Dominick Chirichella, senior partner at the Energy Management Institute in New York said today in a research note.

Libya Conflict

Libyan rebels withdrew from Ras Lanuf in the face of artillery and rocket attacks after advancing toward Qaddafi’s hometown of Sirte. Many insurgents retreated from Brega, east of Ras Lanuf, to regroup in Ajdabiya farther along the coast, about 100 miles (160 kilometers) from the rebel stronghold of Benghazi, the Associated Press said.

The strife in Libya, holder of Africa’s largest oil reserves, is the bloodiest in a wave of uprisings that has toppled the leaders of Tunisia and Egypt and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.

U.S. political and military leaders said they’re unwilling to start providing arms and training for rebels fighting against Muammar Qaddafi in Libya, as the defection of a senior aide undermined his regime.

Yemen Protests

In Yemen, tens of thousands protesters were gathering in cities across the country to demand an end to President Ali Abdullah Saleh’s 32-year rule, while his party mobilized similar numbers of Yemenis to converge on the capital, Sana’a, to demonstrate their support for him.

In the Middle East and North Africa region, “the risk for an escalation is skewed to the upside”, Filip Petersson, a commodity strategist at SEB AB in Stockholm, said in a note.

Crude futures will probably be little changed next week amid concern that the Libyan conflict will spread and that the March 11 earthquake and tsunami will cut Japanese fuel demand, according to a Bloomberg News survey.

Fifteen of 31 analysts, or 48 percent, predicted crude oil will be little changed through April 8. Eleven respondents, or 35 percent, estimated prices will rise and five projected a decline. Last week, 46 percent said futures would fall.

(Source: http://www.bloomberg.com/news/2011-04-01/oil-rises-to-30-month-high-on-concern-libya-conflict-to-prolong-supply-cut.html)