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Oil hits $112+ despite Saudi Arabia plugging gap Oil prices hit $112 per barrel amid concerns about supply disruptions in Middle East: stats on Saudi ability to gap it and comparison with previous highs
Brent crude rose above $112 a barrel on Tuesday as continued unrest in the Middle East and North Africa threatened to further reduce crude supplies even as Saudi Arabia ramped up output to cover Libyan exports. Gains were capped as manufacturing growth in No. 2 oil importer, China slowed in February to a six-month low. In top consumer, the US, crude oil inventories likely increased for the seventh consecutive week last week on higher imports. Brent futures for April rose 55 cents to $112.35 a barrel by 12:40am ET. The contract gained over ten per cent in February, its biggest monthly percentage rise since May, 2009. US crude rose 45 cents to $97.42 a barrel. Both benchmarks surged to their highest in two years last week as the revolt in Libya cut supply and spurred fears that tensions could spread to other oil producers in the Middle East and North Africa. Demonstrators blocked roads into Oman's (Jordan) main oil product port on Monday, although exports were unaffected. "We need to pay attention to the situation in Libya," said Yuichiro Sakaki, a Tokyo-based trader at Mizuho Securities. "It may be a risk factor if [the outages] continue for a long time." Crude oil shipments from Libya are at a virtual standstill as reduced production and bad weather hamper exports from the world's 12th largest producer, shipping sources said. Bank of America Merrill Lynch said Libya's oil infrastructure on the eastern side of the country could be prone to attacks, "creating the risk of a prolonged output loss." The bank added that the oil market's ability to deal with further unrest in the Middle East was limited. Still, a Saudi source said on Monday that the kingdom has another 3.5m barrels per day (bpd) of spare capacity, even after it raised output to around 9m bpd to plug the gap left by Libya. Libya produces 1.6 million barrels per day of mainly light sweet crude and Saudi Arabia has said all demand for extra oil from Libyan customers have been met. "Saudi Arabia appears to be cranking up supplies to fill the gap, but it is unclear at this point whether it will fully offset the supply loss," JPMorgan analysts led by Lawrence Eagles said in a 28 February note.
