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| Oil prices hit fresh highs on Libya unrest fears | Oil prices hit fresh highs on Libya unrest fears |
| (40 minutes later) | |
| Oil prices have continued to climb, hitting their highest levels in two-and-a-half years, amid fears the unrest in Libya could spread to larger oil producing nations and disrupt supplies. | Oil prices have continued to climb, hitting their highest levels in two-and-a-half years, amid fears the unrest in Libya could spread to larger oil producing nations and disrupt supplies. |
| Brent crude hit $119.79 a barrel in early Thursday trade, before falling back to $115.04. | |
| US light crude earlier reached $103.41 a barrel but has since fallen back to $100.95 a barrel. | |
| Oil firms have been suspending production in Libya this week. | Oil firms have been suspending production in Libya this week. |
| France's Total, Spanish oil firm Repsol and Italy's ENI have all partly suspended operations. | France's Total, Spanish oil firm Repsol and Italy's ENI have all partly suspended operations. |
| Austrian firm OMV also suspended operations and Germany's Wintershall said it had shut down operations which produced up to 100,000 barrels of oil per day. | Austrian firm OMV also suspended operations and Germany's Wintershall said it had shut down operations which produced up to 100,000 barrels of oil per day. |
| Market reaction | Market reaction |
| The last time prices were this high was in August 2008 and analysts are predicting more gains may be on the way. | The last time prices were this high was in August 2008 and analysts are predicting more gains may be on the way. |
| European shares fell on Thursday, extending losses for the fourth consecutive session as investors expressed concern about the impact of the oil price spike on global growth. | European shares fell on Thursday, extending losses for the fourth consecutive session as investors expressed concern about the impact of the oil price spike on global growth. |
| In London, the FTSE 100 was down 0.6% at 5886.16, while in Germany the Dax was 1.15% lower at 7111.82. | In London, the FTSE 100 was down 0.6% at 5886.16, while in Germany the Dax was 1.15% lower at 7111.82. |
| "The general unrest in the Middle East has knocked all the confidence out of the market," said Mark Priest, an equities trader at ETX Capital. | "The general unrest in the Middle East has knocked all the confidence out of the market," said Mark Priest, an equities trader at ETX Capital. |
| "We cannot see a turnaround unless suddenly the situation is resolved in Libya," he added. | "We cannot see a turnaround unless suddenly the situation is resolved in Libya," he added. |
| The high oil price also weighed on Asian stock markets. Japan's Nikkei 225 index lost 0.9% while South Korea's Kospi shed 0.7%. | The high oil price also weighed on Asian stock markets. Japan's Nikkei 225 index lost 0.9% while South Korea's Kospi shed 0.7%. |
| Supply worries | Supply worries |
| Oil prices have been rising for months, but the uprising in Libya has caused a sharp increase in crude costs. | Oil prices have been rising for months, but the uprising in Libya has caused a sharp increase in crude costs. |
| According to the International Energy Agency, Libya produces 1.6 million barrels per day of crude, 2% of the world's output. | |
| Barclays Capital estimates that so far about one million barrels per day of production has been shut down, although others are quoting figures nearer half a million. | Barclays Capital estimates that so far about one million barrels per day of production has been shut down, although others are quoting figures nearer half a million. |
| On Tuesday, Saudi Arabia's Oil Minister Ali al-Naimi had tried to reassure markets that his country's spare production capacity could help to "compensate for any shortage in international supplies". | On Tuesday, Saudi Arabia's Oil Minister Ali al-Naimi had tried to reassure markets that his country's spare production capacity could help to "compensate for any shortage in international supplies". |
| Saudi Arabia has 4 million barrels per day of spare capacity which it can bring online if needed. | Saudi Arabia has 4 million barrels per day of spare capacity which it can bring online if needed. |
| However, Amrita Sen, an oil analyst at Barclays Capital believes more concrete actions are required. | |
| "Unless we see an explicit move from... producer countries, i.e. Saudi Arabia, I don't think there is necessarily going to be any downward pressure on oil prices." | |
Market Data | Market Data |
| Last Updated at 12:39 | |
| Marketwatch ticker | Marketwatch ticker |
| Data delayed by 15 mins | Data delayed by 15 mins |
| There are also concerns that it will not be easy to make up the shortfall in Libya's high quality light, sweet crude. | There are also concerns that it will not be easy to make up the shortfall in Libya's high quality light, sweet crude. |
| Much of the spare capacity among the Opec group of oil producing nations is heavy, high-sulphur - or sour - crude, which can be more difficult to refine. | Much of the spare capacity among the Opec group of oil producing nations is heavy, high-sulphur - or sour - crude, which can be more difficult to refine. |
| Spare capacity | Spare capacity |
| Investment banking firm Goldman Sachs said that another regional disruption could create severe oil shortages and require demand rationing. | Investment banking firm Goldman Sachs said that another regional disruption could create severe oil shortages and require demand rationing. |
| "The market cannot accommodate another disruption, in our view, with the problems in Libya potentially absorbing half of Opec's spare capacity," said Jeffrey Currie of Goldman Sachs in a research note. | "The market cannot accommodate another disruption, in our view, with the problems in Libya potentially absorbing half of Opec's spare capacity," said Jeffrey Currie of Goldman Sachs in a research note. |
| Although Goldman Sachs sees the risk of contagion to other large energy producers in the Gulf as relatively low at the moment, "the stakes associated with further contagion are now much higher, which creates even further upside risk to our price forecasts," Mr Currie said. | |
| Analysts say that if oil prices keep climbing, it could push up the cost of fuel and food. This would hit consumers in the pocket and could result in slower economic growth and weaker corporate earnings. | Analysts say that if oil prices keep climbing, it could push up the cost of fuel and food. This would hit consumers in the pocket and could result in slower economic growth and weaker corporate earnings. |
| "It would nail the economy," said Mark Zandi of Moody's Analytics. | "It would nail the economy," said Mark Zandi of Moody's Analytics. |
| Deutsche Bank said oil above $120 a barrel would be an turning point for global economic growth. | |
| Oil "is certainly edging closer to a level that is viewed by our colleagues as a key threat to global growth," Deutsche said in a research note. | |
| "$120 a barrel is the level that oil as a share of global GDP starts to move above 5.5%... which has historically been an environment where global growth has come under pressure." | |
| However, the analysts suggested there would have to be serious disruption to supplies from Saudi Arabia or another major producer for prices to go that high. |