Friday, 18 March 2011

News Report: Oil Price Rises Above $103 As UN Authorizes Libya Strikes

Oil Production Rig
Oil prices rose above $103 a barrel Friday as traders worried the United Nations' authorization of military strikes against forces loyal to Libyan leader Moammar Gadhafi could prolong the conflict and threaten crude exports.

By midday in Europe, benchmark crude for April delivery was up $1.71 at $103.13 a barrel in electronic trading on the New York Mercantile Exchange. The contract added $3.44 to settle at $101.42 on Thursday.
In London, Brent crude was up $1.28 at $116.18 a barrel on the ICE futures exchange.

The U.N. Security Council on Thursday authorized "all necessary measures" short of a ground offensive to stop Gadhafi forces from snuffing out a monthlong rebel uprising. This week, the government's superior firepower pushed rebels back to their eastern stronghold of Benghazi.

As his forces advanced to within 80 miles (about 130 kilometers) of the city, Gadhafi said there would be "no mercy or compassion" for those who resist.

"Hopes of the situation normalizing soon and oil shipments being resumed could now receive a dampener," said a report from Commerzbank in Frankfurt. "The price of oil should certainly remain volatile."

Fierce fighting in Libya has damaged oil operations and cut most of the OPEC nation's 1.6 million barrels a day of crude output.

"The intensity of fighting and the targeting of oil facilities and installations has been a shock to many observers," Cameron Hanover said in a report. "This decision by the U.N. would seem to extend the fighting for a period of time."

Oil fell earlier this week to below $97 on investor concern that last week's massive earthquake and tsunami in Japan would crimp crude demand as the world's third-largest economy struggles to recover. Attention then turned Thursday to Libya and a violent crackdown on anti-government protesters in Bahrain.

"The oil market is confused and in a state of roiling uncertainty," Cameron Hanover said. "As long as there is unrest in Bahrain, oil prices will find it hard to sell off."

Analysts said a weaker dollar and gains on most equity markets also helped boost oil prices. Oil, priced in dollars, becomes cheaper for investors holding other currencies when the U.S. currency weakens.

In other Nymex trading for April contracts, heating oil was up 0.67 cent at $3.0716 a gallon and gasoline added 2.4 cents to $2.9746 a gallon. Natural gas gained 2.8 cents at $4.186 per 1,000 cubic feet.

Credit: Associated Press