Oil reaches above to US$113 as nerves jangle on supplies

Brent crude oil futures traded above US$113 a barrel yesterday as a jittery market jumped higher on a report, soon denied, of Saudi involvement in Bahrain.

2 March 2011, 12:00am

2 min read

A Saudi Arabian official denied a report in an Egyptian newspaper that the kingdom had sent tanks to neighbour Bahrainto try to quell protests there.

April Brent futures were up US$1.40 at US$113.20 a barrel. U.S.crude futures were up 87 cents at US$97.83 a barrel.

Worries about the unrest in the region saw Saudi Arabia's benchmark stock index plunge to 20-month lows. Libya's National Oil Corporation chairman, Shokri Ghanem, said its oil installations were undamaged, although output halved as a result of the departure of oil workers.

Saudi Arabiahas sought to calm the market by pledging to pump more. Iraqalso announced an increase in oil exports in February and preliminary data showed Nigerian crude oil exports will rise sharply in April.

"Saudi Arabiahas compensated for supply losses in Libya, which has prevented a further price rise so far. The biggest OPEC producer is likely to be already producing more than 9 million barrels of crude oil a day at present," Commerzbank analysts said in a note.

"Saudi Arabia's spare capacities are thus another good 3 million barrels a day. The market is likely to get nervous, at the latest, when spare capacities drop below 2 million barrels a day."

OPEC, and in particular Saudi Arabia, spare output capacity has become a vital cushion of potential supply disruption.

In Oman, a small oil producer, the army fired in the air, wounding one person, as it moved to disperse protesters near the northern portof Sohar.

The dollar hit its lowest in three and a half months versus a currency basket yesterday on the view U.S.monetary policy will remain loose, as the market awaited testimony by Federal Reserve Chairman Ben Bernanke.

A sustained period of higher oil prices would significantly affect developing economies but is unlikely to derail their strong recovery since the financial crisis, a senior World Bank official said on Monday.

The European Commission expects oil prices to average around US$100 a barrel this year, EU economic and monetary affairs commissioner Olli Rehn said.

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As such a small player Malta has no chnace in combatting these prices for Oil unless as we always say we make our own fuels - or at least some of it for our own transport. Roll on the Biofuels development proposed by Applied Biofuels Limited in this country which we have been hearing about for the past 14 or so moths. At least with this innovative development by the CCHC/Genesyst venture that was announced earlier this year in the EU Press we should be able to reduce the imports of oil and refined oils for our own transport. I can't wait for this to happen and with the prospects of over 300 jobs being created over the next four years or so the Workers here must also be looking with glee at the prospect.