UpdateCrude futures up $2/bbl following allied Libya attack

21 March 2011 07:34  [Source: ICIS news]

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By Nurluqman Suratman and James Dennis

Libya violence escalatesSINGAPORE (ICIS)--Global crude futures rose sharply on Monday, gaining more than $2/bbl (€1.05/bbl) before easing slightly, after the US and other western governments began a military offensive against Libya, fuelling fears of further supply disruptions in the region.

Worries over protests, which are calling for governmental and political reform in key oil producer Saudi Arabia, Yemen and Syria, also fuelled the hike in oil futures.

At 05:39 GMT, May Brent on London’s ICE futures was trading at $115.60/bbl, up $1.67/bbl on the previous close, after earlier rising to a session high of $116.22/bbl.

April NYMEX light-sweet crude futures were trading at $102.95/bbl, up by $1.88/bbl from the previous close, after previously climbing to an intra-day high of $103.35/bbl.

“Price volatility looks set to rise in the near-term,” said the Commonwealth Bank of Australia in a daily research report.

US President Barack Obama on Saturday authorised a military campaign against Libya, but said that the US would not send ground forces to Libya, according to media reports.

The US launched cruise missile attacks on Saturday, with strikes along the Libyan coast targeting air defence installations around the capital city, Tripoli, and a rebel stronghold near Benghazi, the reports said.

Coalition forces comprising the UK, US, France, Italy and Canada also launched strikes against Libya on Saturday to enforce a UN-mandated no-fly zone.

The coalition began its offensive hours after forces loyal to Libyan leader Muammar Gaddafi attacked Benghazi despite declaring a ceasefire a day earlier.

Production from Libya, the world’s 12th largest oil exporter, is believed to have been drastically reduced from normal levels of around 1.6m bbl/day in the last few weeks amid the ongoing violence, although actual information from the country is difficult to obtain.

Exports from the country, some 85% of which usually flow to Europe, have been ground to a halt, the International Energy Agency (IEA) has reported.

Oil production and exports from Libya could be off the market for many months as a result of both damage to oil infrastructure and international sanctions, the IEA has said.

Prior to the air strikes by Western powers, forces loyal to Libyan leader Muammar Gaddafi controlled all oil export terminals in the western region of the country. These terminals accounted for just over 30% of total crude exports, which averaged just below 1.3m bbl/day in 2010.

In the eastern region of the country, from where around 840,000 bbl/day Libyan crude is exported, government forces control at least four of the six main export terminals, the IEA has said.

Meanwhile in the Middle East, protesters in Syria set fire to the headquarters of the ruling Baath Party, while Yemeni President Ali Abdullah Saleh on Sunday fired his government as he faced increasing pressure from the streets to step down, a Reuters report said.

In Saudi Arabia, crowds of relatives of jailed Saudis protested outside the interior ministry in the capital, Riyadh, on Sunday to demand information about prisoners who have been held for years without trial, media reports said.

Public protests are illegal in Saudi Arabia and plans for massive political demonstrations in the past few weeks have failed to materialise because of extensive police presence.

Saudi Arabian ruler King Abdullah earlier offered $93bn worth of wage increases, jobs and construction projects on 18 March, but did not make any political concessions.

Saudi Arabia is the world’s leading oil exporter and OPEC heavyweight, which produces around 8.62m bbl/day and accounts for some 9.7% of global supplies, according to the latest data from IEA. 

Around 57% of exports from Saudi Arabia head to the Asia Pacific region, according to data from the Energy Information Administration (EIA).

($1 = €0.70)

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By: Nurluqman Suratman

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