02 March 2011 06:55 [Source: ICIS news]
By James Dennis
SINGAPORE (ICIS)--Crude futures are close to a two-and-a-half year high on Wednesday on supply worries triggered by the ongoing turmoil in Libya and an unexpected fall in US crude inventories.
At 05:58 GMT, April Brent on London’s ICE futures was trading at $115.89/bbl, up 47 cents/bbl from the previous close after earlier hitting a session high of $116.36/bbl. The Tuesday North Sea benchmark settled at $115.42/bbl, the highest level since 27 August 2008.
April NYMEX light-sweet crude futures were trading at $100.32/bbl, up 69 cents/bbl from the previous close. Earlier, the contract hit a session high of $100.64/bbl. On Tuesday, the contract hit an intra-day high of $100.69/bbl, the highest level since 15 September 2008.
Crude prices stayed high amid mounting concerns that continued instability in Libya, which has drastically reduced output from the OPEC member, could spread to other nations in the Middle East and North Africa and threaten the global supply of crude oil.
Other countries in the region also recently experienced unrest including Oman, Bahrain and Iran in recent weeks since the overthrow of Egypt’s President Hosni Mubarak.
The US said on Tuesday that Libya could descend into civil war unless Libya’s leader Muammar Gaddafi resigns. Meanwhile, the US and other leading nations have been weighing up military options to help resolve the crisis, with the US moving warships into the region.
Shokri Ghanem, the chairman of Libya’s the state-owned National Oil Corporation, said on Tuesday that output had been cut by half to around 800,000 bbls/day from a normal production level of around 1.6m bbl/day. Other sources including the International Energy Agency (IEA) have indicated that at least 850,000 bbls/day of production have been shut-in.
Libya is the world’s 12th largest crude oil exporter. Libyan crude is mostly sold to European refiners who receive over 85% of the country’s exports.
Saudi Arabia has offered additional supplies to cover lost Libya output. Higher sulphur Saudi crudes are not seen as a perfect replacement for high-quality Libyan grades which are good for producing gasoline as well as low sulphur diesel and jet.
Traders said on Tuesday that some ports in Libya had reopened, with Mellitah and Es Sider terminals said to be loading crude.
In addition, El Sharara crude was also said to be loading from the Zawia Terminal. However, there was still uncertainty of delivery. In addition, the bad weather in the region had prevented tankers from leaving the ports.
Independent industry data from the American Petroleum Institute (API) released on Monday revealed an unexpected fall in US crude and gasoline inventories. US crude inventories fell by 1.1m barrels for the week up to 25 February, while gasoline stocks tumbled 4.9m barrels.
Analysts had been expecting crude stocks to rise by 700,000 barrels, while gasoline stocks had been forecast to fall by a much smaller than expected volume of around 400,000 barrels.
Traders are awaiting the release of the more widely followed official US government inventory data from the Energy Information Administration (EIA), which is due out later on Wednesday.
Additional reporting by Tony Dillon and Giovanni Coiro
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