By William L. Watts and Sarah Turner, MarketWatch
LONDON (MarketWatch) — Light, sweet crude-oil futures edged higher but held below the $100-a-barrel level on Friday, as energy traders digested moves by Saudi Arabia and others to calm supply worries triggered by turmoil elsewhere in the Middle East and in North Africa.
In the electronic trading session of the New York Mercantile Exchange on Friday, the front-month contract (CLJ11 97.04, -0.24, -0.25%) rose 43 cents to trade at $97.71 a barrel.
The front-month April Brent crude contract at London’s ICE also rose, up 82 cents to trade at $112.18 a barrel.
Crude futures have surged in recent sessions to levels not seen since the latter half of 2008, breaching the key $100-a-barrel level.
“There is still a lot of nervousness in the market, but it’s not as elevated as yesterday,” said Arne Lohmann Rasmussen, commodity analyst at Danske Bank in Copenhagen.
Indeed, oil had ended on a weaker note Thursday, after Saudi Arabia and the International Energy Agency said there were adequate supplies to make up for any disruption of Libya’s oil production.
The nation’s crude exports have almost stopped because of reduced production and a lack of staff at ports, as well as security concerns, Reuters reported on Friday.
“Comments from senior Saudi sources that Saudi Arabia is willing and able to supply high-quality light oil to replace Libya’s disrupted supply have eased some of the pressure,” said strategists at RBC.
In a statement released Thursday, the Paris-based International Energy Agency said it was in close contact with the Organization of Petroleum Exporting Countries cartel and major producer countries and had noted “reports regarding their willingness to draw on their excess capacity to ensure additional supplies if required.”
“Both consumers and producers have tools at hands to deliver adequate oil to the market. Producers hold ample spare capacity,” the agency said. The IEA also said that it is “always ready to immediately activate” its existing response mechanism if needed and that IEA members collectively have 1.6 billion barrels of emergency oil stocks at their disposal.
Rasmussen pegged the risk premium currently seen in oil prices at $15 to $20 a barrel and said it’s unlikely to be eroded any time soon, pointing to fears that unrest could spread even if the Libyan situation is resolved and oil production resumes.
“The world is a bit different than it was a month ago,” he said.
Along these lines, Saudi Arabia announced a $36 billion package of new programs and benefits for its citizens Thursday as Algeria officially lifted decades-old political restrictions.
Saudi leaders’ decision to commit to spending on housing, education and social welfare will “buy the government some more breathing space,” said economists at Capital Economics.
In any event, “most of Saudi Arabia’s population is conservative and appears to favor political and economic stability rather more than reform,” they added.
For Algeria, the country’s experience of civil war in the 1990s “makes people there even more wary of a descent into the chaos now seen in neighboring Libya,” Capital Economics told clients.
