GLOBAL MARKETS-Brent oil soars near $120 on Libya; stocks fall

Thu Feb 24, 2011 7:08am EST

* Brent crude at 29-mth high, near $120 a barrel on Libya

* Markets cannot accommodate new outages after Libya-Goldman

* World stocks, copper fall for 4th day in a row

* Gold, Treasury prices up; Swiss franc hits record high

By Dominic Lau

LONDON, Feb 24 (Reuters) - Oil prices soared more than $8.50 a barrel to hit 29-month highs near $120 on Thursday on fears that Libya's unrest could spread to other oil-producing states including top exporter Saudi Arabia, threatening to derail global growth.

World stocks and copper prices fell for the fourth straight day as investors cut their risk exposure, while safe-haven gold and U.S. Treasury prices rose, and the Swiss franc hit a record high against the dollar.

Muammar Gaddafi was struggling to hold onto power in Libya as rebels extended their territory by seizing important towns close to Tripoli. [ID:nLDE71N009]

Goldman Sachs said oil markets were driven by fears of unrest spreading to other producing nations and that another disruption could create severe oil shortages and require demand rationing.

"The market cannot accommodate another disruption, in our view, with the problems in Libya potentially absorbing half of OPEC's spare capacity," Goldman Sachs' Jeffrey Currie said in a research note. [ID:nLDE71N0IB]

Disruption stemming from the revolt in the world's No. 12 exporter Libya has cut at least 400,000 barrels per day (bpd) of the country's 1.6 million bpd output, according to Reuters calculations. [ID:nLDE71M1RM]

Brent crude futures LCOc1 rose 3.4 percent to trade above $115 a barrel after touching a 29-month high of $119.79, while U.S. crude futures CLc1 advanced 3 percent to above $101 a barrel.

The surge in oil prices is threatening to put an end to the recovery in the developed economies and add further inflationary pressure in booming emerging countries.

According to UBS, a $10 increase in oil price will shave off 0.3 percentage points of global growth. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

BREAKINGVIEWS-Oil threat to global growth [ID:nLDE71N0VP]

Oil price, growth calculator: r.reuters.com/jux28r

Graphic on oil price shocks: r.reuters.com/qes28r

States reliant on oil graphic: r.reuters.com/dux28r

Banks warn of oil shortage, growth impact [ID:nLDE71N0VC]

Unrest in MidEast, N. Africa: [ID:nLDE71M1AF]

Analysis on impact on Libyan oil sector: [ID:nN23138693]

Factbox on Libyan oil and gas: [ID:nLDE71K0RV]

Interactive factbox link.reuters.com/puk87r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

GROWTH THREAT

"There has been another spike in oil and the general unrest in the Middle East has knocked all the confidence out the market," Mark Priest, senior equities trader at ETX Capital in London, said. "We cannot see a turnaround unless suddenly the situation is resolved in Libya."

World equities measured by MSCI All-Country World Index .MIWD00000PUS dropped 0.3 percent, falling for the fourth day in a row after hitting a 30-month high on Friday. The index is still up 2.4 percent this year.

MSCI emerging markets index .MSCIEF lost 1 percent to extend the loss for the year to 5.7 percent as investors shift out of developing economies to developed markets on concerns over higher inflation.

U.S. stock index futures SPc1 DJc1 NDc1 fell 0.4 to 0.6 percent, indicating a weak open on Wall Street.

Europe's FTSEurofirst 300 .FTEU3 index lost 0.6 percent, while the VDAX-NEW volatility index .V1XI, a fear gauge, rose 6.2 percent to a two-month high. In Asia, Japan's Nikkei average .N225 fell to a three-week low, down 1.2 percent.

SHELTERS SOUGHT

The dollar was down 0.7 percent at 0.9262 Swiss francs CHF= after touching a record low of 0.9238 franc, and 0.8 percent weaker at 81.83 yen JPY=, while the euro lost 0.6 percent to 1.2752 francs EURCHF=.

"There is a lot of safe-haven demand for the Swiss and the yen but the dollar's downside against these currencies could be limited because for a lasting trend to arise you need U.S. Treasury yields to fall," said Manuel Oliveri, currency strategist at UBS.

Yields on benchmark 10-year U.S. Treasuries US10YT=RR eased 5 basis points to 3.4330 percent, down about 34 basis points from a nine-month high hit earlier this month.

Gold XAU= added 0.4 percent after gaining 0.9 percent in the previous session, though copper CMCU3 eased 0.3 percent after falling 4.4 percent in the previous three sessions. (Additional reporting by Dmitry Zhdannikov, Joanne Frearson and Neal Armstrong in London, and Luke Pachymuthu in Singapore; Graphics by Scott Barber and Vincent Flasseur; editing by Stephen Nisbet)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.