BLBG: Brent Crude Trades Near Two-Year High on Mideast Supply Concern
Oil traded near the highest in more than two years in London as civil unrest spread in the Middle East, renewing concern crude shipments will be disrupted.
Brent futures were little changed after closing yesterday at the highest level since September 2008 as pro-democracy demonstrations stretched into a third day in Bahrain, while protesters clashed with police in Yemen and Libya, the eighth- biggest oil producer in the Organization of Petroleum Exporting Countries. Prices in the U.S. slumped after inventories at the country’s storage hub swelled in Cushing, Oklahoma.
“The risk premium from the whole Middle East story is more reflected in Brent,” said Tobias Merath, head of commodity research at Credit Suisse AG in Zurich. “The divergence between Brent and WTI is stunning, and explained by regional factors. Oversupply at Cushing is a topic again.”
Brent crude for April settlement was at $103.50 a barrel, down 28 cents, at 12:48 a.m. on the ICE Futures Europe exchange in London after advancing as much as 52 cents to $104.30 a barrel. The contract rose yesterday by $2.14 to $103.78, the highest close since Sept. 25, 2008.
Crude for March delivery on the New York Mercantile Exchange was unchanged at $84.99 a barrel. The contract rose 0.8 percent yesterday to $84.99, the highest close since Feb. 11. Oil in New York is up 9.9 percent from a year ago.
The difference between the April contracts in London and New York was at $15.71 a barrel, compared with $15.94 yesterday. The March West Texas Intermediate contract in New York expires on Feb. 22.
Middle East
Political risks to oil supply are “high and rising” amid unrest in the Arab world, JPMorgan Chase & Co. said in a report. Crude rose yesterday after Israeli Foreign Minister Avigdor Lieberman said two Iranian gunboats planned to move through the Suez Canal. The canal authority’s head of traffic said today no Iranian warships have applied to cross through the waterway.
Pro-democracy protesters in Bahrain stepped up demands for the government to resign after an overnight security crackdown left at least three people dead. The Associated Press reported the first protests against Libyan leader Muammar Qaddafi, who has held power since leading a military coup in 1969.
Countries in the Middle East and North Africa were responsible for 36 percent of global oil production and held 61 percent of proved reserves in 2009, according to BP Plc, which publishes its BP Statistical Review of World Energy each June.
“Political tensions in the Middle East continued to intensify, adding to crude supply disruption concerns,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today.
Libya pumped 1.59 million barrels of crude a day in January, making it the eighth-biggest oil producer among those with quotas in OPEC, Bloomberg News estimates show.
Fed Outlook
U.S. Federal Reserve officials “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing,” the Federal Open Market Committee said in minutes of its Jan. 25-26 meeting, released yesterday in Washington. Policy makers raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation.
The jobless rate will average 8.8 percent to 9 percent in the fourth quarter, Fed officials projected, down from November forecasts of 8.9 percent to 9.1 percent.
U.S. crude stockpiles increased by 860,000 barrels to 345.9 million last week, an Energy Department report showed yesterday. A 2 million-barrel gain was forecast, according to the median of 13 analyst responses in a Bloomberg News survey.
Gasoline supplies rose 205,000 barrels to 241.1 million, the highest level since March 1990. Analysts projected a 1.85 million-barrel increase.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
