Oil Closes Highest In More Than Two Years

(NewsCore) - NEW YORK -- Oil prices climbed nearly three percent Tuesday as violence in Libya and the potential spread of the turmoil in the Middle East and North Africa continued to feed concerns over global oil supplies.
Traders are "recognizing what the Middle East turmoil might do to prices" or oil consumers are "being overly cautious to be sure they have plenty of oil supplies on the way," said Charles Perry, president of the energy consulting firm Perry Management.
But, either way, fundamentals -- inventories and consumption -- "have not changed enough to see these type of price rises," Perry said.
Light sweet crude for April delivery rose $2.66, or 2.7 percent, to close at $99.63 a barrel on the New York Mercantile Exchange. That is the strongest closing level for a most active contract since September 2008.
"The struggle in the [oil] market currently divides at those who see the uprising in and about the oil-producing regions as epochal, which will bring far-reaching changes to the production and distribution of oil, and those who are more concerned with the feeble recovery and intransigent debt problems in the consuming countries," said Mike Fitzpatrick, editor of Kilduff Report's Energy Overview.
Crude prices gained as the international community called for the embattled Libyan leader Col. Moamar Ghadafi to step down, and the United Nations imposed sanctions on the country. Government forces reportedly regained control of a key oil-terminal town east of the capital Tripoli.
Saudi Arabian output is running as high as nine million barrels a day, further dimming the impact of the loss of Libyan supplies, the analysts said.
But some traders and analysts were concerned about the likelihood of cuts to Saudi Arabia's spare capacity.
Saudi Arabia has stepped up production to counter the Libyan outages, Tim Evans, energy analyst at Citigroup's Citi Futures Perspective, said in a note, but "multiple problems would soak up additional capacity, reducing the remaining cushion."
And fears of contagion to other North African and Middle Eastern countries continued.
"As the violence rages on in Libya and overall uncertainty grows, there are mounting fears that other producers in the immediate vicinity will suffer similar outages due to political unrest," analysts at Barclays Capital said.

Updated: Tuesday, 01 Mar 2011, 1:32 PM PST
Published : Tuesday, 01 Mar 2011, 1:32 PM PST