By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Oil futures drifted lower in Asian trading hours Wednesday, although the benchmark Nymex contract remained firmly over the $100-a-barrel mark amid ongoing unrest in the Middle East.
Light sweet crude for April delivery (CLJ11 104.24, -0.78, -0.74%) declined 58 cents to $104.44 in the electronic trading session of the New York Mercantile Exchange on Wednesday.
In regular trading in New York on Tuesday, oil prices lost 42 cents as the contract retreated from highs not seen for almost three years.
Commodity strategists at Barclays Capital linked Tuesday’s decline to speculation that supply will increase amid “mounting disquiet from consumer countries” about potential economic implications of the current turmoil in the Middle East.
They said that the market was particularly shaken by “U.S. suggestions that strategic reserves might be used sooner rather than later.”
In addition, the Organization of Petroleum Exporting Countries is debating whether to increase production, Kuwait’s oil minister told reporters on Tuesday. Read more on OPEC production.
However, support remains for oil prices as turmoil shows no sign of abating in the Middle East, with Libyan fighting continuing and investors fretting that serious disruptions could spread to major oil producer Saudi Arabia.
“Further intensification of fighting in Libya and increased concerns about the scope for tensions in more oil-market-sensitive areas” are keeping upside pressure on prices, the Barclays Capital strategists said.
It also may take some time for production from Libya to resume, analysts suggested.
Energy analysts at IHS Global Insight said that international oil companies and traders “seem to be taking a safe approach” and have started to curtail dealings with Libya severely amid the threat of sanctions.
They said companies that ship oil “will be in no hurry to return, as long as insurers at the Lloyd’s of London insurance market are classifying Libya as a high risk, or even war-zone destination.
