LONDON, (AFP) — World oil prices rallied Friday after the United Nations sanctioned air strikes against Libya where popular unrest has practically halted exports of crude to the West.
Brent North Sea crude for delivery in May rose 85 cents to $115.75 a barrel in London trade.
New York’s main contract, light sweet crude for April, jumped $1.10 to $102.52.
“The potential damage to the country’s oil infrastructure is obviously bullish (supportive) for oil prices,” PVM brokers analyst Tamas Varga said of Libya.
A coalition of Western nations geared up Friday to launch quick air strikes against the North African country after the UN approved military action to stop veteran leader Mummer Gaddafi from crushing insurgents.
As NATO gathered to discuss its next moves, the United States, Britain and France were expected to scramble fighter jets against Gaddafi’s forces after they secured the UN Security Council’s blessing.
Libya was producing 1.69 million barrels a day before its recent unrest, according to the International Energy Agency, of which 1.2 million were exported, mostly to Europe.
However the IEA said this week that Libya’s oil exports would “remain off the market for a considerable time”.
Unrest in oil-producing Bahrain was also contributing to the market jitters.
Standard & Poor’s said Friday it had cut Bahrain’s long- and short-term local and foreign currency sovereign credit ratings because of mounting political unrest in the Gulf monarchy.
Bahrain’s Shiite opposition meanwhile called for fresh demonstrations after Friday prayers, in defiance of martial law and a violent crackdown by the US-backed kingdom’s security forces.
Markets were also tracking the latest developments in Japan, the world’s third biggest importer of oil and which is struggling to overcome a nuclear disaster following last week’s devastating earthquake and tsunami.
“Four percent of Japan’s power plant capacities are offline on a sustainable basis after nuclear power plants have been shut down, meaning that Japan’s energy requirements have to be covered to a greater extent by fossil fuels such as oil, coal and gas,” Commerzbank analysts said in a research note to clients. In recent days, the price of uranium — used to generate nuclear power — has slumped by a quarter while the cost of coal and gas have soared more than 10 percent.
“It is odd to think of Europe or Japan as potential growth markets for thermal coal. However, with nuclear power production apparently moving into reverse in these two regions, the outlook for fossil fuels such as thermal coal, in addition to natural gas and oil, appears much more promising,” Deutsche Bank analysts said.
Ironically, Brent crude oil plunged almost $6 at one stage on Tuesday, as fears grew over the potential nuclear disaster in Japan.
Analysts said this was because major radiation leaks would likely hamper reconstruction and economic activity in Japan, the world’s third biggest economy and that in turn would weigh on the country’s oil consumption.