BLBG: Oil Heads for Biggest Weekly Gain Since 2009 on Libya, Economy
Oil headed for its biggest weekly gain in two years on concern the turmoil which has cut Libya’s output may spread to other parts of the Middle East and speculation the U.S. economic recovery will boost fuel demand.
Futures fluctuated today after the U.S., Saudi Arabia and the International Energy Agency made assurances they can compensate for any disruption of Libyan supplies. Crude surged to a 29-month high yesterday amid estimates the country’s output was cut by as much as two-thirds. The U.S. economy expanded faster than expected in the fourth quarter, according to a Bloomberg News survey.
“Supplies should be secured by other countries as long as the disruptions are limited,” said Tetsu Emori, a commodity fund manager with Astmax Ltd. in Tokyo. “When oil prices reached $147 in 2008 the economy was already pushing lower, but currently the economic situation is expanding on a global basis.”
Crude for April delivery gained as much as 69 cents to $97.97 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.67 a barrel at 2:09 p.m. Singapore time. Yesterday, it fell to $97.28 after climbing as high as $103.41. Prices earlier today dropped as much as 0.9 percent to $96.39.
Brent crude for April settlement rose as much as 1.2 percent, or $1.36, to $112.72 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it climbed to $119.79, the highest since Aug. 22, 2008, before settling at $111.36. Brent is up 9.9 percent this week, the most since October 2009.
U.S. Economy
The Commerce Department may say today the U.S. economy expanded at a 3.3 percent rate in the fourth quarter, faster than the 3.2 percent pace the estimated in January, according to the median estimate of economists in a Bloomberg survey.
U.S. crude supplies climbed 822,000 barrels to 346.7 million in the week ended Feb. 18, the Energy Department said yesterday in a weekly report. Inventories were forecast to climb by 1.1 million barrels, according to the median of 15 analyst estimates in a Bloomberg News survey.
New York oil’s 13 percent gain this week is the biggest since the 15 percent surge in the seven days ended Feb. 27, 2009, exchange data show.
Crude advanced above $100 this week as the violence forced companies including Total SA and Eni SpA to halt production and Libyan leader Muammar Qaddafi vowed to fight a growing rebellion until his “last drop of blood.” As much as 1 million barrels of the country’s daily output may have been shut, according to a Feb. 23 estimate from Barclays Capital.
Libya, which pumps 1.6 million barrels of oil a day, is the ninth-largest producer among the 12 members of OPEC, shipping most of its crude and fuels across the Mediterranean to Europe. The country has the largest reserves in Africa.
Price Swings
Prices swung the most in a year yesterday as Saudi Arabia and the IEA moved to allay concern that Libya’s lost output would lead to a supply shortfall. Brent traded in a range of $10.19, the most since Sept. 29, 2009, while New York’s West Texas Intermediate fluctuated in a range of $7.79 a barrel.
The Paris-based IEA said it is ready to release emergency stockpiles, if needed. Saudi Arabia and other members of the Organization of Petroleum Exporting Countries said they won’t wait for an emergency meeting of the group to increase output, according to a person with knowledge of producer-nation policy.
OPEC is prepared to meet any shortage if needed, Saudi Arabia Oil Minister Ali al-Naimi said Feb. 22. The country pumps 8.4 million barrels a day and says it has the ability to bring on a further 4 million.
Crude Supplies
The production cuts in Libya were the first instance of crude supplies being reduced by the civil unrest spreading through the Middle East and North Africa.
Protests ignited by the ouster of Tunisia’s president last month and fanned by the Feb. 11 fall of Egyptian President Hosni Mubarak have also spread to Yemen and Bahrain, prompting Saudi Arabia, the world’s biggest oil exporter, to introduce moves intended to increase living standards.
While OPEC spare capacity is sufficient to make up for any shortfall from Libya, there is a “significant upside risk” to prices if the unrest starts to reduce supplies from other oil- producing countries, Goldman Sachs Group Inc. said in a Feb. 23 report.
Nomura Holdings Inc. predicted on the same day that oil prices may surge to $220 on the Libyan outages and any expansion into neighboring Algeria.
Price Forecast
Oil may gain next week amid the Middle East turmoil, a Bloomberg News survey showed. Twenty-three of 40 analysts, or 58 percent, forecast WTI futures will climb through March 4. Last week, 44 percent said crude would increase.
Brent crude has gained every week since protests spread into Egypt on Jan. 25. About 3.5 percent of global oil output is shipped through Egypt via the Suez Canal and adjacent Suez- Mediterranean Pipeline.
New York’s gains have lagged behind Brent’s as a crude glut in the U.S. suppresses prices. WTI futures have risen 11 percent since Jan. 24, compared with 18 percent for Brent.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
