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Oil prices push higher on Libya supply concerns | Oil prices push higher on Libya supply concerns |
(about 1 hour later) | |
Oil prices have risen further on worries that supplies could be disrupted if unrest continues in Libya and spreads across the Middle East. | |
US light, sweet crude was up $0.49 at $95.91 a barrel, and had hit $96.25 earlier on Wednesday. It has now risen almost $10 since the start of the week. | |
Brent crude was $0.77 up at $107.57 a barrel, having hit $107.66 earlier. | |
Total has become the third major European oil company to suspend production in Libya. | Total has become the third major European oil company to suspend production in Libya. |
Spanish oil firm Repsol and Italy's ENI suspended operations in the North African country earlier this week. | |
Libya is the world's 12th-largest exporter of oil and the majority of its output goes to Europe. | Libya is the world's 12th-largest exporter of oil and the majority of its output goes to Europe. |
High quality | |
Saudi Arabia's Oil Minister Ali al-Naimi tried to reassure markets on Tuesday that his country's spare production capacity could help "compensate for any shortage in international supplies". | |
However, oil industry analyst Mehdi Varzi told the BBC World Service that he estimated that the unrest could be affecting "up to a third" of Libya's total crude oil exports. | |
Mr Varzi said it would be difficult to compensate for the loss of these supplies. | |
"They are of extremely high quality in terms of crude... and this kind of crude is very difficult to replace, even if the Saudis want to replace it." | |
If Libyan supplies went completely offline then in the short term the price of crude could rise by another $10 or $20 a barrel, Mr Varzi said. | |
However if unrest spread further throughout the region then the situation would become much more serious, and develop "a fully fledged international oil price crisis", he added. | |
Major shift? | |
The markets have been gripped by uncertainty this week as investors tried to work out the possible impact of the Libyan violence and continued unrest across the region. | |
"Global investors are now trying to decide if the Middle East crisis means a major shift of geopolitical balance of power in the region," said Masayuki Kubota of Daiwa SB Investments. | "Global investors are now trying to decide if the Middle East crisis means a major shift of geopolitical balance of power in the region," said Masayuki Kubota of Daiwa SB Investments. |
He added that there could be "more instability and possible further oil price rises". | He added that there could be "more instability and possible further oil price rises". |
On Tuesday, International Energy Agency chief economist Fatih Birol said oil prices were in the danger zone. | On Tuesday, International Energy Agency chief economist Fatih Birol said oil prices were in the danger zone. |
He said they could rise further if turmoil continued in the Middle East and that may slow the recovery from the global economic crisis. | He said they could rise further if turmoil continued in the Middle East and that may slow the recovery from the global economic crisis. |
"The global economy is more fragile now than it was in 2008," Mr Barratt said. | "The global economy is more fragile now than it was in 2008," Mr Barratt said. |
"Growth has been driven by stimulus packages and austerity measures. I don't see it being able to absorb a rise to $140 like it did two years ago." | "Growth has been driven by stimulus packages and austerity measures. I don't see it being able to absorb a rise to $140 like it did two years ago." |