Oil prices jumped to above $103 a barrel on Monday after Libyan
leader Moammar Gadhafi vowed a “long war” amid a second night of allied
military strikes on the OPEC nation.
A coalition of the U.S., France, U.K. and other nations bombed tanks
and anti-aircraft sites Sunday and deterred Libyan fighter jets from
flying. Gadhafi said he would not resign and pledged to continue to
attack the eastern rebel stronghold of Benghazi.
Fierce fighting during the last month has already shut down most of
Libya’s 1.6 million barrels per day of crude output. Investors are now
concerned international intervention could extend the conflict and keep
Libya’s oil production out of the market longer than perviously
estimated.
“The regime in Tripoli shows no sign of giving up,” Capital Economics
said in a report. “The prolonged loss of Libyan oil could push prices
all the way up to the highs above $140 seen in 2008.”
Gadhafi also warned that Western powers would not get Libya’s oil,
suggesting his forces may sabotage crude installations. Some traders
worry a cornered Gadhafi could lash out in a last stand that disrupts
regional tanker shipments.
“A ‘scorched earth’ response from Gadhafi could cause disruptions to
ships traveling the Mediterranean,” energy consultant The Schork Report
said.
By early afternoon in Europe, benchmark crude for April delivery was
up $2.12 to $103.19 a barrel in electronic trading on the New York
Mercantile Exchange. The contract fell 35 cents to settle at $101.07 per
barrel on Friday.
In London, the May contract for Brent crude was up $2.14 at $116.07 a barrel on the ICE futures exchange.
While equity markets were boosted Monday by hopes that Japan was
making progress in bringing under control radiation leaks at its
Fukushima nuclear power plant, analysts said concerns about lower energy
demand from the world’s third-largest economy would keep a ceiling over
oil prices.
“The Japanese nuclear disaster seems to be coming to a close at an
excruciatingly slow pace, meaning that the Japanese economic recovery
will likely be slow and torturous,” said Edward Meir at MF Global in New
York, adding that the situation “will continue to exert a drag on
energy prices.”
In other Nymex trading for April contracts, heating oil was up 4.45
cents at $3.0688 a gallon and gasoline added 5.41 cents to $3.0035 a
gallon. Natural gas gained 4.1 cents at $4.209 per 1,000 cubic feet.
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