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Oil hits 32-month high on Libya shortage | ASHARQ AL-AWSAT English Archive 2005 -2017
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LONDON, (Reuters) – Oil hit a 32-month high near $125 on Friday after attacks on Libyan oil fields raised the prospect of long-term supply cuts, with commodities in general rising on optimism global economic recovery will fuel demand.

Ongoing unrest in the Middle East and concerns postponed elections in Nigeria could spark a new wave of militant violence and disrupt supply also contributed to the bullish mood in the market.

By 1216 GMT Brent was up $1.82 to $124.49, after earlier climbing more than $2 to just below $125. U.S. crude climbed $1.29 to $111.59, down from slightly an intra-day peak of $111.90 last reached in September 2008.

“Troubles in Libya mean Gaddafi has caused damage to the Sirte basin which has about two thirds of their oil, there’s dollar weakness and some very large fund action piling into the market in oil and base metals,” said Rob Montefusco, an oil trader at Sucden Financial.

“People are saying the target is $150 but if we get up there it will come off pretty quickly. I don’t think this is a sustainable rally because we’re not seeing real demand pick up.”

Rebels and forces loyal to embattled leader Muammar Gaddafi exchanged bitter accusations over who had attacked oilfields and infrastructure vital to both sides.

The seven-week old civil war has cut Libya’s 1.6 million barrels per day output by 80 percent to between 250,000 and 300,000, a senior government official said.

It took Kuwait two years to restore oil production to pre-war levels of about 1.6 million bpd, similar to Libya’s pre-conflict production, after the 1991 Gulf War, according to International Energy Agency data.

Fellow OPEC member and 1.9 million bpd producer Nigeria postponed parliamentary elections again in some areas although polls will go ahead in most of the country on Saturday as planned.

“Upcoming elections in Nigeria has already seen an uptick in violence in oil rich states of Akwa Ibom and Balyesa, with any loss in Nigerian crude (similar in quality to Libya) likely to put further pressure on light-heavy differentials,” said Barclays Capital analyst Amrita Sen.

Futher supply worries came from Norway where a trade source said the North Sea Oseberg crude oil stream will load 118,000 barrels per day in May, significantly down from the provisional program of 160,000 bpd in April.


Crude prices rallied in step with gains across the commodities market where gold hit a record high, driven by a weaker dollar and positive global outlook despite Portugal’s request for a bailout earlier this week.

But surging oil prices have stoked inflationary concerns for governments worldwide due to the potential adverse impact on economic growth of the rising cost of foodstuffs and raw materials, and the risk of demand destruction.

“Awash with still extremely cheap money – the leading policy approach to cope with the passed recession – the investment community is pouring record volumes into long commodity positions,” said analysts at JBC Energy in a note.

“This drives not only fuel and food prices to record highs, but also raises the costs for other raw materials massively, clearly putting the economic outlook under threat.”