Brent hits $115 as Libya fighting intensifies

By @ibtimes on

Oil rose by more than $2 on Wednesday to over $115 a barrel as fighting intensified in Libya, and an OPEC delegate said the group saw no need to hold an emergency meeting to ease supply fears.

Brent crude oil futures for April were up $2.02 to $115.08 a barrel at 1520 GMT after forces loyal to Muammar Gaddafi hit storage tanks in the oil terminal of Es Sider, rebel fighters said.

U.S. crude was up 18 cents at $105.20 after earlier reaching an intraday high of $105.92.

A rebel movement official in Benghazi said Gaddafi forces had also hit an oil pipeline leading to Es Sider.

Gaddafi's forces are closing in on the rebel-held main square of Zawiyah, where fighting has led to the closure of one of Libya's biggest refineries.

NATO Secretary-General Anders Fogh Rasmussen said the alliance was not looking to intervene in Libya but its military was ready to respond at short notice.

He added that any action would require a clear United Nations mandate and widespread international support.

Christopher Bellew, an oil trader at Bache Commodities in London, said the perception of prolonged trouble in Libya was driving the rally in oil prices.

As the outlook for Western intervention looks less likely -- which would bring things to a quick conclusion -- then we are looking at a prolonged struggle, he said.

Gaddafi might defeat his opponents gradually, or his opponents might end up going underground, fighting a guerrilla campaign which might involve them blowing up pipelines to try to hurt Gaddafi economically, he said.

Barclays Capital analyst Paul Horsnell was also skeptical about a swift return of Libyan oil to the market, even if the current government gets the upper hand.

We would expect Libyan oil to face a difficult and perhaps prolonged re-entry to the world market, he said in a note.

The oil price was also supported by comments from an OPEC delegate that the group saw no need at present to hold an emergency meeting to discuss raising its output.

Leading OPEC producer Saudi Arabia is already pumping more oil -- up to 9 million barrels per day (bpd).

It's a fear trade, said Michael Hewson, an analyst at CMC Markets. It's about the fear of these troubles escalating -- there is some concern about how the Saudi Day of Rage will go on Friday.

He said supply was not necessarily the issue, but the perception that the unrest in the Middle East could affect Saudi Arabia, or its ability to raise supply if the need arises.

The Saudi Foreign Minister Prince Saud Al-Faisal told a news conference on Wednesday Muslim clerics had banned demonstrations in Saudi and dialogue was the best way to achieve what Saudis wanted.

NO-FLY ZONE

World powers were still considering imposing a no-fly zone over the Libya, with UK Prime Minister David Cameron seeking international support for any measures to be taken.

The Pentagon said the United States was still looking at a range of military options on Libya. Libyan oil trade has been virtually paralyzed as banks decline to clear payments in dollars due to U.S. sanctions.

But Austrian energy group OMV said it had been buying small amounts of Libyan crude oil and would continue to do so.

U.S. crude inventories climbed a larger-than-expected 3.8 million barrels in the week to March 4, the American Petroleum Institute (API) said on Tuesday, ahead of EIA statistics due on Wednesday at 1530 GMT.

(Additional reporting by Alejandro Barbajosa; editing by James Jukwey)

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