March 10, 2011 / 8:45 AM / 9 years ago

Oil pares losses as Saudi protest heightens worries

NEW YORK (Reuters) - Oil recouped most of its deep losses in late trade on Thursday after reports of police firing on protesters in Saudi Arabia revived fears of further unrest in the world’s top exporter.

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

Prices had tumbled early in the day after a Spanish credit rating revived worries over euro zone credit, driving the dollar higher.

That took precedence over further violence in Libya, which traders fear is set for prolonged conflict that may do long-lasting damage its oil infrastructure.

Downbeat economic data from China and the United States weighed on prices. But this was overshadowed by news of stun grenades being used to disperse a crowd in Saudi Arabia’s oil-producing Eastern province just one day before activists plan an unprecedented “Day of Rage” protest.

One witness told Reuters police lobbed percussion bombs to disperse a crowd of about 200 people belonging to the kingdom’s Shi’ite minority.

“The news report that protesters were fired upon by police in Saudi Arabia has pulled crude up from the lows,” said Phil Flynn, analyst at PFGBest Research in Chicago.

In London, ICE April Brent crude settled down 51 cents at $115.43 a barrel, nearly $2 up from the day’s low. On the New York Mercantile Exchange, U.S. crude for April delivery settled down $1.68 at $102.70.

Brent’s premium against U.S. crude widened for a second day to $12.73 at the close, from $11.56 on Wednesday. The premium hit a record above $17 last week, but had contracted sharply over the past week as traders took profits.

Traders will now watch closely for any disturbances on Friday after unprecedented calls for mass protests billed as a “Day of Rage” against Saudi Arabia’s absolute monarchy.

Protests are also planned in other Gulf countries such as Yemen, Kuwait and Bahrain on Friday, after the day’s religious prayers. inspired by upheavals in Tunisia and Egypt.


In Libya, momentum appeared to turn against the rebels, who had hoped to charge up the coast and into the capital Tripoli. Instead state television said government forces had cleared the oil port of Ras Lanuf of “armed gangs”.

Saif al-Islam, leader Muammar Gaddafi’s most prominent son, said Libya is preparing full-scale military action to crush a rebellion and will not surrender even if Western powers intervene in the conflict.

But rebel soldiers denied the eastern oil town had fallen to pro-Gaddafi troops. A local oil company based in Benghazi, where rebels have set up a National Libyan Council working to oust Gaddafi, said it was making arrangements to market oil directly to foreign buyers.

With oil production running at less than two-thirds its norm, exports essentially halted and reports of oil facilities being hit in the violence, few traders were expecting a quick recovery in output from the OPEC member.


Oil prices were also pressured by data showing China, the world’s second largest oil importer, unexpectedly posted the largest trade deficit in seven years at $7.3 billion, stirring global economic growth worries even though economists said the sudden drop was likely temporary.

But China’s crude oil imports rose to the third highest level on record on a daily basis as refiners ramped up operations despite a lull in demand lull during the holidays.

New U.S. jobless claims rose last week and the country’s trade deficit widened in January, weighing further on U.S. crude.

Additional reporting by Robert Gibbons in New York; Editing by Marguerita Choy and David Gregorio

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