CALGARY - Oil prices rose Monday in response to violence in Libya and unrest in Yemen, carrying the stock prices of Calgary-based energy companies with them. The benchmark S&P/TSX composite index was up 224.07 points, or 1.62 per cent, to 14,013.70, with strong gains posted in both the energy and materials sectors. Benchmark oil prices rose $1.26 US on Monday to close at $102.33 a barrel, and Brent crude was up 90 cents to $114.83. Gold gained $10.30 to $1,426.40 an ounce and the Canadian dollar was up 66 basis points to 102.07 cents against the greenback. Continuing unrest in the Middle East and military intervention in Libya were the main drivers, as well as speculation that demand for commodities such as oil and gas will increase in the wake of the devastating earthquake in Japan and its ensuing nuclear crisis. “I think really what we’re seeing is strength because of oil prices,” said John Stephenson, senior vice-president at First Asset Investment Management. “I think the betting is right now that eventually Moammar (Gadhafi) will be gone, and what we’re seeing in Syria, what we’re seeing in Yemen, what we’re seeing in Bahrain will eventually spill into Saudi Arabia.” Peter Buchanan, a commodities economist for CIBC World Markets, said fundamentals support the bank’s forecast of an average $87 US per barrel WTI price for crude oil in 2011, but suggested geopolitics are keeping it over $100. “We still, think there’s at least $10 to $15, if not more, of risk premium in there at this point in time,” he said, noting that there is no demand side support for higher oil prices. “If it were just fundamentals, certainly we think oil would be trading with an ‘8’ in front of it. We do see some upside but it looks to us as if industrial country inventories of around 58 days of forward cover is pretty adequate going into this.” Natural gas, which has jumped in the days after the earthquake, fell seven cents to close at $4.16 per million British thermal units (mmBTU). Nonetheless, Cody Kwong with Calgary-based FirstEnergy said investors are in a buying mood ahead of the seasonally slow spring breakup period. “I think it’s just the broader sentiment, people are buying into the bullishness of oil and gas has been up, which helps.” Several major Calgary oil and gas companies rose more than three per cent on the day, including Cenovus Energy which rose $1.32 to $37.53. Suncor Energy, which evacuated staff from Libya, was up $1.54 to close the day at $44.63. Precision Drilling moved 42 cents higher, to $12.57, extending a rally that has added almost 20 per cent in less than a week. Nexen Inc., which has operations in Yemen, climbed 93 cents to $26.81, near a 52-week high of $27.11. Likewise, TransGlobe Energy, which is also active in Yemen, gained 44 cents to $13.79. Alan Knowles, an oil and gas analyst who covers Nexen for Hayward Securities in Calgary, said the troubles in on the Arabian Peninsula won’t have too much impact on the company’s production. He noted that Nexen managed to operate without disruption in Yemen through two decades of civil war. Nexen is currently negotiating a contract extension for its Yemen concession which produced 40,000 barrels a day in the fourth quarter of last year. “It’s a declining asset for them, so it’s probably less of an issue than it would have been three years ago.”

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