Oil prices hit $100 per barrel

AP News
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Posted: Feb 23, 2011 6:07 PM
Oil prices hit $100 per barrel

Oil hit $100 per barrel Wednesday for the first time in 2 1/2 years as the unrest in Libya worsened, and gasoline prices in the U.S. climbed to nearly $3.20 a gallon, the highest level ever for February.

West Texas Intermediate crude for April delivery jumped $2.68, or 2.8 percent, to settle at $98.10 per barrel on the New York Mercantile Exchange. Earlier in the day, prices hit triple digits for the first time since Oct. 2, 2008. West Texas Intermediate has soared 18 percent since Valentine's Day.

The national average for a gallon of regular gasoline rose 2.3 cents Wednesday to $3.194, according to AAA, Wright Express and Oil Price Information Service. Gas has jumped 8.2 cents per gallon in the past month and $1.28 in the past year.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said he expects gasoline prices will continue to rise in the next few months to between $3.25 and $3.75 per gallon as the spring driving season approaches.

The uprisings in Tunisia and Egypt earlier this month already had markets on edge before protests escalated in Libya, which has the biggest oil reserves in Africa. The rebellion widened Wednesday as protesters overwhelmed government buildings and advanced around Tripoli, the capital.

French oil giant Total said it started to wind down its oil operations in Libya, where it produced an average of 55,000 barrels per day last year. That follows similar moves by other oil companies.

Libya's biggest oil producer, Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations. Germany's Wintershall said it shut down operations that produced up to 100,000 barrels of oil per day. Evacuations of oil company employees and their families continue.

Barclays Capital estimates that as much as 1 million barrels per day of production has been shut down so far. In January, Libya produced almost 1.7 million barrels per day of oil and natural gas liquids, according to the International Energy Agency.

The production losses will be felt mostly in Europe. Ireland relies on Libya for 23 percent of its oil imports, while 22 percent of Italy's oil imports are from Libya. The U.S. imported only about 51,000 barrels per day from Libya, less than 1 percent of its total crude imports.

The International Energy Agency and Saudi Arabia have pledged to make additional oil available to cover any shortfall in world supplies, but that hasn't eased tensions in oil markets.

Larry Goldstein, a director at the Energy Policy Research Foundation in Washington, said Libya's oil is a high-quality variety that is used to produce products like gasoline, jet fuel and diesel. Some refineries won't be able to run on Saudi Arabia's lower-grade crude, so a sustained shutdown in Libya could start a bidding war for comparable kinds of crude.

"That would raise product prices immediately," Goldstein said.

Analysts are watching similar protests in oil-rich Bahrain. Barclays analyst Helima Croft said the uprising in Bahrain could spill over to the eastern provinces of Saudi Arabia. While it probably won't hurt the Saudi's huge oil-production operations, "it's going to make a lot of people nervous," Croft said.

Major oil stocks rose in Wednesday trading. Exxon Mobil gained $1.63 to close at $87.07. ConocoPhillips added $1.96, or 2.6 percent, to close at $78.57. Chevron rose $1.95 to settle at $102.27. Occidental Petroleum rose 82 cents to close at $102.96. Marathon oil gained $1.47, or 3.1 percent, to close at $49.18.

In other Nymex trading in March contracts, heating oil added 11.3 cents to settle at $2.9166 per gallon and gasoline gained 12.1 cents to settle at $2.8677 per gallon. Natural gas picked up 2.9 cents to settle at $3.936 per 1,000 cubic feet.

In London, Brent crude added $5.47, or 5 percent, to settle at $111.25 per barrel on the ICE Futures exchange. Brent, which is used to price oil in Asia, Europe and other global markets, passed the $100 mark on Jan. 31.

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AP Business Writer Sandy Shore in Denver and AP Energy Writer Jonathan Fahey in New York contributed to this story.