Oil Futures Spike as Libyan Protests Intensify
Monday, February 21st, 2011
Crude oil hit its highest price in two years today due to the escalating anti-government protests in Libya. This has fueled fears that oil supply will be adversely affected as unrest seems to be spreading across the Middle East and Africa.
The New York futures increased by 8.9 percent since last Friday in reaction to the harsh rhetoric of the Libyan leader Muammar Qaddafi menaced protesters saying that if the rebellion did not stop, the potential outcomes are civil war and “rivers of blood,” according to Bloomberg.
Government forces today attacked protesters who had taken control of Benghazi, the second largest city in Libya, as well as a significant supplier of crude oil. Because the country generates nearly 2 million barrels per day, making it the eighth largest oil producer in the world, the turbulence in this country is very concerning to investors.
According to ABC news, the president of Lipow Oil Associates in Houston, Andrew Lipow, has indicated when the markets resume trading tomorrow, gas prices will be affected significantly. Lipow goes on to say that the U.S. consumer can expect rising gas prices almost immediately over the coming seven to ten days.
While the Middle East suppliers contribute only 9 percent of the world’s supply of oil, they are responsible for 11 percent of total American imports. This is what is driving concerns over the oil market.
The Wall Street Journal has weighed in on the topic largely predicting the return of the days when oil was at $100 per barrel. Already, in Europe, the Brent rose to over $108 today. While U.S. benchmarks put oil at $86.10 per barrel (unofficially $91.55 today), refineries are already experiencing the price increases. According to the same article, Valero Energy Corp. is paying prices that trail the European Brent benchmark instead of the U.S. benchmark. As predicted by Andrew Lipow, these costs will be passed on to gas stations, ultimately affecting gas consumers.
Article by Andrew Timm
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
Tags: crude oil , libya , oil prices , protests
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