Quantcast

Oil slides as rebels take Libyan ports

By Chris Kahn

Associated Press

Published: Monday, March 28 2011 1:52 p.m. MDT

NEW YORK — Oil prices slipped below $104 per barrel Monday after Libyan rebels recaptured some key oil ports and promised to resume exports. Prices, however, remain 22 percent above what they were in mid-February, when fighting in Libya squeezed off shipments that had supplied nearly 2 percent of the world's oil.

Energy analysts said oil prices should fall as Libya gets closer to a resolution of its six-week-old crisis. Yet it's unlikely the rebels will bring much oil back to the world market soon. "There's no sign that the Middle East is quieting down right now," Barclays Capital analyst Helima Croft said. "And we still think Libya's oil is out for this year."

Traders remain concerned that uprisings in the Middle East will threaten more oil supplies. Protests in Yemen, Bahrain and Syria could further destabilize the region and draw OPEC heavyweights Saudi Arabia and Iran into protracted conflict, analysts said.

The concerns go beyond major oil-producing countries. Yemen produces only 0.3 percent of the world's oil, but markets will price in the added dangers to crucial shipping lanes off its coast.

"The truth is, there are geopolitical land mines all over the place," PFGBest analyst and trader Phil Flynn said.

Benchmark crude dropped $1.42 on Monday to settle at $103.98 per barrel on the New York Mercantile Exchange. In London, Brent crude lost 84 cents to settle at $114.58 per barrel on the ICE Futures exchange.

As rebel forces bore down on Moammar Gadhafi's hometown of Sirte Monday, analysts in the U.S. questioned who would risk buying oil from Libyan rebels.

Qatar, which has recognized the rebels as Libya's legitimate representatives, plans to help them sell crude on the international market. But Libya's production relies on joint ventures with foreign companies, like Italy's Eni SpA, that have evacuated employees from the country.

Barclays' Croft said European refineries will continue to stay away as long as international sanctions prohibit trade with the country. That leaves Asian countries as the likely customers. However they will need to know who's in charge of the oil fields, and if they will make good on contracts.

"If you're an oil company, you have to ask yourself: Who do you send the money to?" said Andrew Lipow, an energy consultant in Houston. "That's very unclear right now."

Most of Libya's trading partners haven't officially recognized the rebels, leaving Gadhafi's regime officially in control of the oil fields. "It's so tricky to be engaged in that type of deal," Croft said. "We just don't know who the rebels really are."

Oil had been moving higher well before the Libyan crisis, as world demand rebounded at the end of last year and started to match peak levels from 2007. A ceasefire in Libya should cool off oil's surge, but traders said they don't expect any sustained drop until the entire region settles down.

A higher dollar also weighed on oil prices Monday. Oil is traded in dollars, and a rise tends to push oil prices down as crude becomes more expensive for investors holding foreign currency.

Meanwhile, gasoline pump prices in the U.S. continue to set records. The national average hit $3.584 per gallon on Monday, the highest ever for this time of year. It's jumped 25.1 cents in the last month and 78.1 cents since a year ago, according to AAA, Wright Express and Oil Price Information Service.

Gasoline costs more than $4 per gallon in California, Alaska and Hawaii.

In other Nymex trading for April contracts, heating oil gave up 3.03 cents to settle at $3.0412 per gallon and gasoline futures fell 2.19 cents to settle at $3.0276 per gallon. Natural gas fell 2.9 cents to settle at $4.374 per 1,000 cubic feet in the final day of trading on the April contract.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS