Brent pushes to $114 as Libya effect persists

By @ibtimes on

Oil rose over $1 on Wednesday to trade at over $114 a barrel as fighting intensified in Libya, and OPEC said it saw no need to hold an emergency meeting to ease supply fears.

Brent crude oil futures for April were up 69 cents to $113.75 a barrel at 1030 GMT, after pushing to an intraday high of $114.39 following news that heavy fighting in Libya had forced the shut down of one of its biggest refineries.

The Zawiyah refinery is the biggest provider of gasoline in Libya, and has a total capacity of 120,000 barrels per day.

The market also rallied after an OPEC delegate said the group saw no need at present to hold an emergency meeting to discuss raising its oil 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 that supply was not necessarily the issue, it was more the perception that if unrest in the Middle East spread, it could affect Saudi Arabia, or its ability to raise supply if the need arises.

U.S. crude was down 10 cents at $104.92 as high inventories at key delivery point Cushing, Oklahoma weighed on prices. It had earlier reached an intraday high of $105.19.

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

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 guerilla campaign which might involve them blowing up pipelines to try to hurt Gaddafi economically, he said.

Libyan tanks and warplanes intensified their offensive against rebels on Tuesday aiming to recover lost territory, while world powers considered a no-fly zone over the country.

Speaking on television, Muammar Gaddafi said that the Libyan people would take up arms against Western powers if they tried to enforce a no-fly zone.

The Pentagon said that 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.

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 William Hardy)

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