Oil prices continued to set new post-recession highs Monday as forces loyal to Moammar Gadhafi pounded rebels near a key oil port in Libya. It's unclear how long the country's oil exports will be cut off, and traders prepared for a worst-case scenario in which world supplies would be under pressure for months.
Benchmark West Texas Intermediate crude for April delivery gained $1.02 to settle at $105.44 per barrel on the New York Mercantile Exchange. The price almost hit $107 per barrel earlier in electronic trading, the highest level since Sept. 26, 2008.
In London, Brent crude fell 93 cents to settle at $115.04 per barrel.
The rise in oil is driving U.S. gasoline prices to levels that weren't expected for at least another month. Pump prices have jumped an average of 39 cents per gallon since the Libyan uprising began in mid-February, forcing motorists to pay an additional $146 million per day for the same amount of fuel. The national average hit $3.509 per gallon on Monday, according to AAA, Wright Express and Oil Price Information Service.
Libya, which sits on the largest oil reserves in Africa, has been engulfed in a four-week rebellion as militants try to oust Gadhafi after 41 years in power. Officials in the country say oil fields continue to operate, but daily exports of 1.5 million barrels could be cut off for some time.
On Monday, Libyan warplanes launched more airstrikes on rebel positions around the Ras Lanouf oil port as forces loyal to Gadhafi tried to keep rebels from advancing on his stronghold in the capital, Tripoli.
OPEC has ramped up production to make up for the loss of Libyan crude. The Financial Times reported Monday that Saudi Arabia, Kuwait, the United Arab Emirates, and Nigera are planning to put another 1 million barrels per day on the market.
Also, the Obama administration is evaluating whether to tap U.S. strategic oil reserves to slow the rising price of oil. A White House spokesman said officials will base that decision on a variety of factors, including the flow of oil to the U.S.
The government started to stockpile oil after the 1973 Arab embargo. The Strategic Petroleum Reserve, located in massive underground salt deposits in Texas and Louisiana, currently holds 727 million barrels of oil _ enough to supply the nation for 37 days.
Releasing additional supplies and ramping up production could temporarily cool off overheated energy markets, but experts warned that it also would put a tighter squeeze on the world's oil as the global economy recovers and consumption rises.
"They'll remove the cushion of extra supplies," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Until this situation gets resolved, prices are going to continue to grind higher."
It also doesn't make sense to tap into the U.S. reserves right now, analyst and trader Stephen Schork said. The supply problem exists mostly in Europe, where many refineries rely on Libyan crude. In contrast, U.S. refineries have access to a relatively large supply.
The Energy Information Administration estimates OPEC can crank up production by another 4.7 million barrels per day. An extended shut down of Libya's exports would slice that capacity by about 32 percent to around 3.2 million barrels per day. Most of the world's spare capacity lies in OPEC nations, primarily Saudi Arabia.
"The question then is what else can happen," said Erik Kreil, who covers international energy markets for EIA. "If it gets worse in North Africa or the Middle East, production could fall further and you'll have less spare capacity."
Global spare capacity fell below 2 million barrels per day in 2008 before oil prices spiked to an all-time record of $147 per barrel.
In other Nymex trading on Monday for April contracts, heating oil lost 2.36 cents to settle at $3.0657 per gallon, while gasoline futures lost 4.25 cents to settle at $3.0039 per gallon. Natural gas rose 11.8 cents to settle at $3.927 per 1,000 cubic feet.
Associated Press Writer Paul Schemm contributed to this story from Ras Lanouf, Libya.