LONDON – Oil rose, heading for a third quarterly gain in New York, as concern the Libyan conflict will prolong production cuts countered signs of rising supplies in the U.S., the world’s largest crude consumer.
Prices advanced as much as 1.2 percent on Thursday after troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces. Crude stockpiles climbed to a record last week at Cushing, Okla., the delivery point for U.S. futures, while fuel demand fell, according to a government report on Wednesday.
“We think that the risk in Middle East-North Africa will escalate and pose a larger threat to crude oil supply,” said Filip Petersson, commodity strategist at SEB Commodity Research in Stockholm. “$115 is starting to stand out as a reference level.”
Crude for May delivery advanced as much as $1.24 to $105.51 a barrel in electronic trading on the New York Mercantile Exchange. It was at $105.38 at 1:34 p.m. London time. On Wednesday, the contract fell 52 cents to settle at $104.27. Futures have increased 15 percent from January through March, the strongest first quarter since 2005.
Brent oil for May settlement on the London-based ICE Futures Europe exchange rose as much as $1.65, or 1.4 percent, to $116.78 a barrel. Prices are up 23 percent this quarter. The European benchmark traded at a $11.02 premium to U.S. futures. The gap reached a record $19.54 on Feb. 21. It averaged 76 cents last year and $11.10 in the first three months of this year.
Libya Conflict
The conflict in Africa’s third-largest producer is the bloodiest in a wave of uprisings that has toppled the leaders of Tunisia and Egypt and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen. Libya’s crude output slumped to a “trickle” after companies suspended operations and evacuated staff, the Paris-based International Energy Agency said March 15. The country pumped 1.6 million barrels a day in January, according to Bloomberg estimates.
The turmoil may constrain oil supplies in the second quarter and buoy prices at more than $100 a barrel. Oil is entering a “dangerous zone” for the economy, the IEA said.
Libya’s exports are likely to remain halted for most of this year, according to Bank of America Merrill Lynch, Barclays Plc and JPMorgan Chase & Co. The banks’ forecasts for Brent crude in the next three months range from $118 to $122 a barrel.
U.S. President Barack Obama and U.K. Prime Minister David Cameron said they may send arms to opposition forces. Rebels, after advancing toward Qaddafi’s hometown of Sirte, withdrew in the face of artillery and rocket attacks as pro-Qaddafi forces retook control of the oil port of Ras Lanuf.
Crude Stockpiles
Oil supplies at Cushing, Okla., where New York-traded West Texas Intermediate grade is delivered, increased by 1.69 million barrels, or 4.2 percent, to 41.9 million, according to the Energy Department. That’s the highest since the government began keeping records at the hub in 2004.
“Investors are torn between the inventory levels in the U.S. and event risk in the Middle East,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.
Total crude inventories climbed 2.95 million barrels in the week ended March 25 to 355.7 million as imports continued to rise, the Energy Department said. It was the fourth weekly increase in supplies and almost double a median gain of 1.5 million barrels forecast by analysts in a Bloomberg News survey.
A measure of fuel consumption decreased 3.7 percent to 18.6 million barrels a day, the lowest since November, the report showed. Regular gasoline at the pump, averaged nationwide, gained 0.8 cent to $3.595 a gallon yesterday, the highest since October 2008, according to AAA, the country’s largest motoring organization.
Gasoline futures for April delivery settled at $3.064 a gallon on Wednesday, the highest since Aug. 27, 2008. The more actively traded May contract was at $3.079 on Thursday.
Gasoline has gained 26 percent so far this quarter, making it the second-biggest gainer among 22 commodities tracked by Bloomberg, behind a 34 percent jump in cotton. Sugar, down 16 percent, is the worst performer.
