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Libya drives oil prices to almost $100 Saudi Arabia says it has spare production capacity, if needed; International Energy Agency would also step in to offset shortfalls The Associated Press
Oil prices rose again Feb. 24 as the rebellion in Libya appeared to have shut down even more crude production than previously estimated.
Italy’s Eni, the largest oil producer in Libya, said the violent uprising has taken 1.2 million barrels per day off the market, up from previous estimates of about 1 million bpd. Most of that oil is exported to Europe, but it will push prices up everywhere by increasing competition for similar varieties of higher-quality crude used to make gasoline and jet fuel.
In the U.S., benchmark West Texas Intermediate crude rose $1.67 to $99.77 per barrel on the New York Mercantile Exchange. Prices have jumped 18 percent since Feb. 18. In London, Brent crude added $2.95 at $114.20 on the ICE Futures exchange.
At the pump, gasoline prices rose more than 2 cents Feb. 24 to a new national average of $3.228 per gallon. A gallon of regular is 11.8 cents higher than it was a month ago and 55 cents more than the same time last year, according to AAA, Wright Express and Oil Price Information Service. Experts estimate that the national average could rise as high as $3.75 by spring.
Gasoline costs an average $3.60 per gallon in California and $3.44 per gallon in New York. The cheapest gas could be found in Wyoming, at an average of $2.998 per gallon.
Oil prices are climbing even though the world’s largest oil consumer, the U.S., has large supplies of both oil and gasoline. The Energy Information Administration reported Feb. 24 that oil supplies in the U.S. grew the week ending Feb. 18 by 800,000 barrels. That’s less than analysts expected, but supplies are still well above average for this time of year. Gasoline supplies fell by 2.8 million barrels.
America in competition for oil “It doesn’t matter what the supply is here,” analyst and trader Stephen Schork said. “America is in competition with Europe and Asia and everywhere else for oil. And when there’s a shortage somewhere, it pushes prices everywhere else.”
With no clear outcome in sight, Schork said the violence in Libya has put a “fear premium” of about $15 to $20 per barrel on oil prices. That premium is currently flowing through energy markets, pushing gasoline prices to the highest levels ever for this time of year.
Oil and gasoline prices will likely hold at elevated levels as long as Libya’s future remains uncertain, said Michael Lynch, president of Strategic Energy & Economic Research. Prices should fall again once order is re-established. Libya relies on oil revenues and it will need to keep operations running no matter who is in charge, he said.
“It doesn’t look like there’s any real damage to Libya’s oil fields,” Lynch said. “So once there’s a government in place everything could get back up and running within a few weeks.”
If protests subside in the region, oil prices could eventually fall to where they were earlier in February, pulling pump prices down anywhere from 30 to 40 cents per gallon, Lynch said.
In other Nymex trading in March contracts, heating oil rose 4 cents to $2.9603 per gallon and gasoline added 6 cents at $2.9305 per gallon. Natural gas lost 10 cents at $3.842 per 1,000 cubic feet.
Saudi’s have spare capacity Saudi Arabia’s oil minister said Feb. 22 the oil powerhouse has ample spare capacity to offset any supply disruptions, while other OPEC ministers downplayed the need to pump new crude into the world market to temper an oil price rally fueled by unrest in Libya.
The International Energy Agency, looking to allay concerns, said it “stands ready” to step in and offset any supply disruptions.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, said it has enough reserves. Saudi oil minister Ali Naimi said the kingdom’s production capacity is at 12.5 million barrels per day, a level that can help “compensate for any shortage in international supplies.” His comments were carried on the official Saudi Press Agency.
Mohammed bin Dhaen al-Hamli, the oil minister for the United Arab Emirates, said that OPEC “will intervene if need arises, but supplies are reaching the market so far.”
Libya is the first of the OPEC member states to be hit by the wave of unrest that had led to the ouster of the leaders of Tunisia and Egypt.
The uprising against Moammar Gadhafi is the most violent in the region, so far, and has sent tremors through oil markets concerned that the demonstrations could spread and disrupt flows from other OPEC members, particularly Saudi Arabia. OPEC supplies about 35 percent of the world’s crude oil. While international markets are reeling, OPEC appeared to adopt a wait-and-see approach, convinced that the price spikes were not related to the actual volume of crude oil on the market.
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