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Brent crude rises on fierce battles in Libya
March 9, 2011 / 5:30 AM / 7 years ago

Brent crude rises on fierce battles in Libya

<p>Fuel storage tanks are seen at Mobil Oil's oil refinery in Melbourne March 8, 2011. REUTERS/Mick Tsikas</p>

NEW YORK (Reuters) - Brent oil prices rebounded toward $116 a barrel on Wednesday as intense fighting in Libya stoked more supply worries and U.S. crude fell as inventories rose sharply, widening Brent’s premium against U.S. crude.

Brent crude for April delivery settled $2.88 higher at $115.94 a barrel, having earlier hit $116.18.

U.S. April crude closed at $104.38 a barrel, down 64 cents, after hitting an early high of $105.92.

Brent crude’s premium over U.S. benchmark West Texas Intermediate crude widened to $11.56, from $8.04 at the close on Tuesday. That was a gain of $3.52, or 44 percent, the biggest single-day percentage gain of Brent over U.S. crude since November 15.

Muammar Gaddafi’s forces struck an oil pipeline leading to the Es Sider town and dropped bombs on storage tanks in the Ras Lanuf oil terminal area in the eastern section of Libya that is rebel-controlled.

Libyan state television blamed the explosions on “al Qaeda-backed” armed elements.

Rebels said they had retaken the main square of the western city of Zawiyah after pro-Gaddafi forces took control of it earlier in the day. The fighting has led to the closure of one of Libya’s biggest refineries there.

HIGHER U.S. STOCKPILES

U.S. crude prices weakened after data from the U.S. Energy Information Administration showed crude inventories rose 2.51 million barrels last week, dwarfing the forecast for an increase of just 400,000 barrels in a Reuters poll.

More telling for U.S. crude, crude stocks at the key delivery hub in Cushing, Oklahoma, soared 1.69 million barrels to a record 40.26 million barrels.

But losses for U.S. crude were limited as the weekly data showed drawdowns for gasoline and distillate inventories were bigger than expected, reflecting improving demand.

U.S. gasoline for April jumped more than 8 cents to close at $3.0272 a gallon, while April heating oil gained nearly 6 cents to $3.0707 a gallon, both near 2-1/2-year highs.

PROLONGED STRUGGLE?

Perception of prolonged trouble in Libya was driving the rally in oil prices, said Christopher Bellew, an oil trader at Bache Commodities in London.

“As the outlook for Western intervention looks less likely -- which would bring things to a quick conclusion -- then we are looking at a prolonged struggle,” he said.

Confirming previous non-Libyan estimates, Shokri Ghanem, chairman of Libya’s National Oil Corp, told a news conference in Tripoli that production has been cut to about half a million barrels per day, from 1.6 million bpd, as many foreign and local workers have left oil fields.

Libyan oil trade has been paralyzed as banks decline to clear payments in dollars due to U.S. sanctions, though Austrian energy group OMV said it had been buying small amounts of Libyan crude oil and would continue to do so.

NATO Secretary-General Anders Fogh Rasmussen said the alliance was not looking to intervene in Libya, but its military was ready to respond at short notice.

Oil prices fell on Tuesday after Kuwait’s oil minister said OPEC was considering raising output due to the Libyan outage.

But an OPEC delegate said on Wednesday that the group saw no need for an emergency meeting to discuss raising output.

Leading OPEC producer Saudi Arabia is already pumping more oil -- up to 9 million barrels per day -- to keep supplies available if needed.

Saudi Shi‘ites staged another small protest in the kingdom’s Eastern province, defying a ban on demonstrations, but Foreign Minister Prince Saud al-Faisal said dialogue, not protest, was the best way to bring about change.

OPEC member Algeria’s oil minister said on Wednesday he was confident that potential domestic unrest in Algeria or Saudi Arabia would not disrupt oil exports.

Additional reporting by Robert Gibbons, David Sheppard and Janet McGurty in New York; Claire Milhench in London; Alejandro Barbajosa in Singapore; Editing by Marguerita Choy and Walter Bagley

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