Middle-east Arab News Opinion | Asharq Al-awsat

Oil near $108 amid Libya fighting, strong demand | ASHARQ AL-AWSAT English Archive 2005 -2017
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SINGAPORE, (AP) – Oil prices fell to near $108 a barrel Tuesday in Asia as traders mulled whether political uprisings in the Middle East and signs of strong global crude demand justify extending a 30 percent rally since mid-February.

Benchmark crude for April delivery was down 35 cents at $108.12 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Monday, the contract gained 53 cents to settle at $108.47, the highest since September 2008.

In London, Brent crude for April delivery was down 21 cents to $120.85 a barrel on the ICE Futures exchange.

On Monday, Libyan rebels fought forces loyal to Muammar Gaddafi in the Mediterranean oil port of Brega. Control of the town has switched sides several times since the rebellion began in February.

“This is becoming a long-drawn out fight that promises to dominate headlines for weeks and potentially months,” Cameron Hanover said in a report. “One has to wonder what kind of long-term damage may be inflicted on oil facilities in this key coastal city.”

Most of Libya’s 1.6 million barrels a day of crude output capacity has been shut down by the fighting. However, supplies from other oil producers in the Middle East and North Africa have not been disrupted, and some analysts expect oil prices will drop as protests in the region die down.

“The worst fears of contagion to other major producers have not been proved right,” Capital Economics said. “In time we expect the geopolitical risk premium in oil prices to fall away.”

Improving global economic data has also helped boost prices. Strong U.S. jobs figures and Chinese manufacturing numbers last week suggested demand in the two largest crude consumers will likely stay robust.

But higher prices for crude products such as gasoline, diesel and heating oil threaten to quicken inflation and push central banks to raise interest rates, which in turn could cool economic growth and oil demand.

“Many commodity prices are reaching danger levels that, while boosting inflation in the short term, will also undermine global demand for these same commodities over the medium term, increasing the chances that prices subsequently collapse,” Capital Economics said.

In other Nymex trading in April contracts, heating oil fell 0.7 cents to $3.16 a gallon and gasoline dropped 0.7 cents to $3.16 a gallon. Natural gas futures were down 0.4 cents at $4.29 per 1,000 cubic feet.