Brent Hits 2-1/2 Year High on Libya Export Concerns
Clashes in oil producer Libya sent benchmark Brent crude to 2-1/2-year highs on Monday above $105 a barrel on fears that supplies to Western countries could be disrupted, while U.S. prices rallied by more than $4.
London Brent futures were up $1.73 at $104.25 a barrel after breaking above last week's peak of $104.52, its highest since September 2008.
U.S. light sweet crude oil futures rose by $4 to hit $90.20 a barrel.
Oil prices extended their gains in European afternoon trade on Monday as the unrest in Libya escalated, renewing concerns that protests could spill into other oil-producing countries.
One of the bloodiest revolts in the region hit the oil exporter as scores were killed in anti-government protests in Tripoli, tribal leaders spoke out against long-time leader Muammar Gaddafi and army units defected to the opposition.
The leader of the Al-Zuwayya tribe in eastern Libya said oil exports to the West would be cut off unless authorities stopped violence against protesters.
"Libya is a significant producer and exporter of good quality crude oil and threats by the tribal leader to stop production is worrisome," said Christophe Barret, an oil analyst at Credit Agricole Corporate and Investment Bank.
Libya produced 1.58 million bpd in January and major disruptions in the oil-rich north African country would present serious strategic challenges for Western governments.
Italy looks set to bear the brunt of the fall-out if Libya descends further into chaos, but on Monday Eni Societa per Azioni said output there has proceeded normally over the past 24 hours.
Traders are watching events carefully in OPEC's second largest oil producer Iran for signs of escalating tensions.
Iran arrested the daughter of former president Akbar Hashemi Rafsanjani on Sunday for taking part in a banned opposition rally, the official IRNA news agency reported.
"Iran is the next big worry," Barret added, referring to market concern over the wave of popular unrest in north Africa and the Middle East which has already toppled presidents in Tunisia and Egypt.
Oil prices extended their rally on Monday after striking workers halted production at Libya's Nafoora oilfield, Al Jazeera television reported on Monday without giving further details.
"Violence in Libya is the main driver of the price rise. An influential tribal leader has threatened to cease oil shipments to the West within 24 hours if the violence against protesters does not end," said analysts at Commerzbank in a report.
Protesters in Libya were told leader Muammar Gaddafi would enforce security at any price and fight until the last man standing.
Oil major BP said it has suspended preparations for exploratory drilling for oil and gas in western Libya as a result of growing unrest there.
Austrian oil and gas group OMV said operations in Libya were unaffected by the unrest but it was withdrawing expatriate staff from the country.