Oil prices hit 29-month highs

LONDON.
OIL prices hit 29-month highs yesterday to near US$120 a barrel on growing fears that the unrest in Libya could spread to other oil-producing countries including top exporter Saudi Arabia, threatening to derail global growth.
World stocks and copper prices fell for the fourth straight day as investors cut their risk exposure, while safe-haven gold, Swiss francs and US Treasury prices rose.
Libyan security has cracked down on anti-government protesters and fighting has spread to the capital Tripoli after erupting in Libya’s oil-producing east last week with no signs of leader Muammar Gaddafi stepping down after 41 years in power.
Goldman Sachs said oil markets were driven by fears of unrest spreading to other producing nations and that another disruption could create severe oil shortages and require demand rationing.
“The market cannot accommodate another disruption, in our view, with the problems in Libya potentially absorbing half of Opec’s spare capacity,” Goldman Sachs’ Jeffrey Currie said in a research note.
Disruption stemming from the revolt in the world’s No. 12 exporter Libya has cut at least 400 000 barrels per day (bpd) of the country’s 1,6 million bpd output, according to Reuters calculations.
London Brent crude futures rose 5,6 percent to trade above US$117 a barrel after touching a 29-month high of US$119,79, while US crude futures advanced 4,3 percent to above US$102 a barrel.
The surge in oil prices is threatening to put an end to the recovery in the developed economies and add further inflationary pressure in booming emerging countries.
According to UBS, a US$10 increase in oil price will shave off 0,3 percentage points of global growth.
“There has been another spike in oil and the general unrest in the Middle East has knocked all the confidence out the market,” Mark Priest, senior equities trader at ETX Capital in London, said.
“We cannot see a turnaround unless suddenly the situation is resolved in Libya.” – Reuters.