Oil prices rise due to escalating conflict in LibyaOil advanced for the first time in three days amid speculation that an escalating conflict in Libya will help ease a global supply surplus that’s driven crude into a bear market.
Brent futures rose as much as 1.6 percent in London. Storage tanks at Libya’s largest oil port of Es Sider capable of holding four times the country’s daily production are at risk of catching fire because of strong winds, according to a government official.
Algerian Energy Minister Youcef Yousfi called for the Organization of Petroleum Exporting Countries to cut output to boost prices, the Associated Press reported.
Oil has fallen 46 percent this year, set for the biggest annual drop since 2008, as OPEC resisted supply cuts to defend market share even as production in the U.S. climbed to the highest level in three decades amid a shale boom. Libya pumped 580,000 barrels a day in November, down from about 1.59 million at the end of 2010, data compiled by Bloomberg show.
“Clearly potential disruptions to supply could be constructive for oil,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said. “But we’ve known about this for over a week and the market appeared to shrug it off. So while it might be part of the background support for prices at these levels I don’t think it’s the primary driver.”
Brent for February settlement gained as much as 95 cents to $60.40 a barrel on the London-based ICE Futures Europe exchange and was at $59.84 at 12:12 p.m. Singapore time. The contract declined 79 cents to close at $59.45 on Dec. 26, capping a fifth weekly loss. The European benchmark crude traded a premium of $4.58 to West Texas Intermediate, the U.S. marker grade.
WTI for February delivery increased as much as $1.01, or 1.9 percent, to $55.74 a barrel in electronic trading on the New York Mercantile Exchange. It slid $1.11 to $54.73 on Dec. 26. The volume of all futures traded was about 2 percent above the 100-day average.
Libya’s oil production has slumped amid a civil war that began in 2011 when dictator Muammar el-Qaddafi died. The blaze at Es Sider started on Dec. 25 after the Petroleum Facilities Guard gave Islamist militias an ultimatum before airstrikes and rebels fought back with rockets.
Five tanks at Es Sider were on fire, Ali al-Hasy, a spokesman for the oil guard, said. The facilities have a storage capacity of 6.2 million barrels, according to Mohamed Elharari, a spokesman at National Oil Corp.
“The market has long been aware of the risks rising in Libya,” Kang Yoo Jin, a commodities analyst at Woori Investment & Securities. “A recovery in oil prices is hard to expect when there’s a supply glut.”