OIL FUTURES: Crude Settles Higher As Libya Stays In Focus

Feb 25, 2011

NEW YORK (Dow Jones)–Crude futures settled higher Friday, ending near $98 a barrel as oil markets remain focused on the violent unrest in Libya.

Light, sweet crude for April delivery settled up 60 cents at $97.88 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 78 cents higher at $112.14 a barrel.

Oil prices finished the week up 14%, but the surge came amid a roller-coaster trading environment due to falling oil production in Libya. While Friday’s session remained muted, on Thursday prices whipsawed in an $8 range, reaching two-and-a-half year highs above $103 a barrel. Saudi Arabia and a group of major oil-consuming nations said they had plenty of oil available, however, sending futures into negative territory.

With Moammar Gadhafi’s decades-long rule over the oil-rich nation increasingly imperiled by violent opposition, investors are wary that any new developments in the crisis could send oil prices surging.

“Certainly people don’t want to be short going into the weekend,” said Stephen Schork, head of oil-trading advisor Schork report, referring to bets prices will fall.

The International Energy Agency, which represents many of the world’s largest oil-consuming nations, said the unrest has curtailed up to 750,000 barrels a day of Libya’s 1.6 million barrels a day of oil production. The agency said it would “continue to closely monitor” the situation and could tap strategic stocks when necessary.

Saudi officials are in talks to supply refineries with oil from their spare production capacity as well, which could make up for any short-term disruptions.

“The crucial question remains whether the Gadhafi regime will be toppled within a couple of days with some reasonable succession scheme, or whether the country is heading towards a prolonged civil war,” wrote JBC Energy analysts.

While oil investors remain glued to reports out of Libya, analysts said actions by Saudi Arabia or the IEA to help with any disruptions could tame the recent price surge. The ICE raised margin requirements Friday for its Brent futures contracts, pushing speculative traders to sell some contracts to lock in profits.

Brent futures set a new record for volume on the ICE Thursday, topping a record set Wednesday. Volume in Nymex-traded futures is also elevated.

Brent, the European benchmark, continues to trade at a sharp premium to its U.S. counterpart. The gap between Brent and Nymex-traded West Texas Intermediate crude was recently near $14, due to a large supply glut in the U.S. that has kept a lid on prices in recent weeks.

U.S. crude oil stockpiles rose by 800,000 barrels last week, according to data released Thursday by the Department of Energy.

Front-month March reformulated gasoline blendstock, or RBOB, settled 2.28 cents, or 0.8%, higher at $2.7395 a gallon. March heating oil ended 5.36 cents higher at $2.9309 a gallon.


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