Crude Oil Advances to a 29-Month High as Libya Unrest Threatens to Spread

By Mark Shenk - Mar 4, 2011 12:45 PM PT
BLOOMBERG

Crude in New York increased to a 29- month high on concern unrest in Libya will spread to other North African and Middle East energy exporters, curbing shipments.

Oil rose 2.5 percent as Libyan leader Muammar Qaddafi sent troops to recapture towns in the western part of the country and prepared to quash protests in the capital, Tripoli. Prices also advanced on signals U.S. economic growth is accelerating. The nation’s jobless rate fell to 8.9 percent, the lowest level since April 2009, a government report showed.

“Unrest in Libya continues to fuel concerns about supplies,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based broker. “We’re facing a weekend amid a drumbeat of instability. Nobody wants to be short when there could be a major disruption over the next two days.”

Crude oil for April delivery increased $2.51 to $104.42 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 26, 2008. The contract rose 6.7 percent this week, the third straight advance, and is up 30 percent from a year ago.

Brent crude for April settlement rose $1.18, or 1 percent, to end the session at $115.97 a barrel on the London-based ICE Futures Europe exchange. The contract gained 3.4 percent this week, the sixth straight weekly increase.

Technical Analysis

Brent may advance past $119 a barrel as prices continually surge above ranges and moving averages, according to technical analysis by Glen Ward, head of retail derivatives at London Capital Group Holdings Plc. (LCG)

The 9-day, 14-day and 40-day moving averages “are all pointing north,” Ward said. Brent is trading above the three averages, while the 9-day average has crossed over the 14-day, signaling bullish near-term activity, he said. Targets are $117.81 and the Feb. 24 peak of $119.79, the highest intraday price since Aug. 22, 2008, he said.

Fighting in Libya has cut crude production in the North African country by as much as 1 million barrels a day, according to the International Energy Agency. Libya pumped 1.59 million barrels a day in January, Bloomberg News estimates show.

“The troubles in Libya remain the focus of the market,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There’s no clear solution in the foreseeable future.”

An oil company building was bombed in Brega, a Libyan energy hub with a terminal and refinery, Al Arabiya television said. The rebels have repelled government attempts to retake the town over the past three days.

‘A Concrete Loss’

“Prices are mostly up on the news from Libya,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’ve got a concrete loss of barrels and oil facilities are now under attack.”

Demonstrations have toppled leaders in Tunisia and Egypt, while there have been protests in countries including Iraq, Iran, Yemen and Oman. In Saudi Arabia, the biggest oil producer in the Organization of Petroleum Exporting Countries, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.

“Everyone in the market is very concerned about the situation in the Middle East,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The Day of Rage protest called for next week in Saudi Arabia will keep us on edge.”

The turmoil in the Middle East also pushed oil products prices higher in Europe. Jet fuel, diesel and gasoline surpassed $1,000 a metric ton in Europe for the first time in more than two years.

European Fuel Prices

Jet fuel traded at $1,060 a ton today in the Amsterdam- Rotterdam-Antwerp oil-trading hub, bringing its advance this year to 28 percent, according to data compiled by Bloomberg. Premium gasoline rose to $1,046 a ton while diesel in the Mediterranean region jumped to $1,006 a ton.

U.S. payrolls rose 192,000 in February compared with the 196,000 median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. Employment climbed in manufacturing, construction and temporary help agencies, while state and local government payrolls fell.

The unemployment rate was forecast to increase to 9.1 percent, according to the median of responses in a Bloomberg News survey of economists.

Factory Orders

Orders to U.S. factories rose 3.1 percent in January, the most since September 2006, after a revised 1.4 percent gain in December that was larger than previously estimated, figures from the Commerce Department showed today. Economists projected orders would advance by 2 percent, according to the median of 65 estimates in a Bloomberg News survey.

The U.S. is the biggest oil-consuming country, responsible for 22 percent of global demand in 2009, according to BP Plc, which publishes its BP Statistical Review of World Energy each June.

Oil volume in electronic trading on the Nymex was 775,922 contracts as of 3:15 p.m. in New York. Volume totaled 770,794 contracts yesterday, 2.9 percent below the average of the past three months. Open interest was 1.56 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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