LONDON – Oil prices rocketed close to $120 on Thursday, levels unseen since mid-2008, as growing instability in Libya stoked supply jitters across the Middle East and beyond.
Brent North Sea crude for delivery in April rallied as high as $119.79 per barrel, the highest since August 22, 2008. It breached $110 easily on Wednesday as Libya was gripped by a fresh wave of violence and other protests continued across the Middle East.
New York’s light sweet crude for April, known as West Texas Intermediate (WTI), jumped to $103.41, a level last seen in late September 2008.
“Oil prices continued to surge higher as events in Libya dominate the headlines and the oil market,” said Westhouse Securities analyst David Hart.
“The country’s output of high-quality crude is being significantly impacted due to the exodus of foreign personnel.”
The oil market has spiked higher this week as foreign energy companies have halted or cut output from Libya as a result of the violence.
Spain’s biggest oil company, Repsol, stopped production there earlier this week as anti-government protests spread.
Italy’s ENI, the biggest foreign energy major in Libya, said Thursday that it has cut oil production in the country by over 50 percent due to the ongoing unrest while British giant BP evacuated all expatriate staff from the restive country.
“Crude prices held up over the past week, underpinned by persistent geopolitical concerns amid ongoing tensions in the Middle East and North Africa,” said VTB Capital commodities analyst Andrey Kruchenkov.
“Violence in Libya escalated with the country’s Eastern provinces allegedly (escaping from) government control and reports of shutting down production capacity by oil majors.”
In later afternoon deals on Thursday, Brent stood at $113.94, up $2.69 from Wednesday’s closing level, while New York was $1.31 higher at $99.41 per barrel.
Libyan leader Moamer Kadhafi spoke Thursday to the elders of a town west of the capital where he said a drug-crazed mob of youths spurred on by Al-Qaeda had killed four policemen, urging them to bring their children under control.
Speaking on state television by phone from an undisclosed location, the embattled 68-year-old former colonel fretted about unrest in Az-Zawiyah, 50 kilometres (30 miles) west of Tripoli as the battle to unseat him began to encircle the capital.
Al-Jazeera television reported heavy fighting there between pro- and anti-government forces and said there had been an undetermined number of casualties.
“Increasing unrest in North Africa and the Middle East has been a key driver of the latest spike (in prices),” said Shane Oliver, chief economist at AMP Capital Investors.
He said in a research note that Libya accounts for 1.8 million barrels a day of oil production, while Algeria, which has also seen protests, accounts for 2.1 million barrels.
Libya has Africa’s largest oil reserves, is the continent’s fourth largest producer and is a member of the Organisation of the Petroleum Exporting Countries (OPEC), the cartel that produces about 40 percent of global supplies.