Crude hits $100 on Libya violence, supply worries
Light, sweet crude for April delivery briefly touched $100 a barrel exactly on the New York Mercantile Exchange. The last time the contract hit that level was Oct. 2, 2008, as crude prices were tumbling from record highs and the economic recession began to set in.
Oil prices quickly pulled back from the $100 mark, recently trading up $4.01, or 4.2%, at $99.41 a barrel. Brent crude on the ICE futures exchange, which passed $100 earlier this year, was up $5.58, or 5.3%, at $111.36 a barrel.
Crude prices have soared the last two sessions as demonstrations in oil-rich Libya turned increasingly violent and oil companies there said they were suspending production. Uncertainty over how the crisis would continue to unfold is the main factor lifting oil prices to fresh highs, said Mark Waggoner, president of Excel Futures.
"Nobody knows what's going to happen with Moammar (Gadhafi)," Libya's leader, Waggoner said.
Germany's Wintershall AG said it has stopped oil production in Libya, where it produces about 100,000 barrels a day. Spain's Repsol YPF said it was suspending operations at the Sharara oil field, which supplies more than 200,000 barrels a day. Other companies, including Italy's Eni SpA, France's Total SA and Norway's Statoil ASA, said some operations were being suspended.
The total impact on crude production in the country, which exports an estimated 1.3 million barrels a day, was unclear. Barclays Capital, however, estimated the turmoil has affected 1 million barrels a day of production.
"With the unrest evolving, we've got quite a bit of premium in the market," said Tony Rosado, broker at GA Global Markets in New York.
The front-month contract got a $3.50-a-barrel boost overnight with the expiration of the cheaper March contract. Brent crude on the ICE futures exchange jumped $4.34, or 4.1%, at $110.12 a barrel.
Libya is the first major oil producer to see its production disrupted by the mass protests in the region that have swept out entrenched rulers in Tunisia and Egypt. Unlike those countries, Libya is an important oil exporter, supplying mostly countries in Europe. It is the eighth-largest oil producer in the Organization of Petroleum Exporting Countries, according to the International Energy Agency, and has the largest crude reserves in Africa.
Leading OPEC producers have said they would tap spare capacity to make up for any disruptions in supply of Libyan crude. However, Libya's crude is of particularly high quality, and several analysts have said replacement oil from other countries is likely to be of the poorer-quality sour variety.
"A barrel-for-barrel replacement by Saudi Arabia of Libyan crude is a misnomer, since grades and quality differ and there are likely to be time lags for the former to bring their production online," Barclays analysts said.