Oil prices over the past week have seesawed. It was first pulled down by the immediate negative effect on energy demand from Japan’s strongest earthquake on record and investor pessimism about the country’s growth prospects.
But from the second half of last week, oil got a boost from the realization that hydrocarbons will have to compensate for the loss of nuclear capacity and from the escalation of geopolitical tensions in North Africa and the Mideast Gulf.
Anti-aircraft fire rang out across Tripoli for a third night on Monday, but air attacks on Libya are likely to slow, a U.S. general said, as Washington holds back from being sucked into the country’s civil war.
“It now seems likely that there will be a significant loss of Libyan oil supplies for some time,” said Ric Spooner, chief market analyst at CMC Markets.
“This will reduce the buffer of excess capacity and increase the oil market’s vulnerability to any new supply shocks which may emerge. This may see a risk premium being maintained in the oil price for some time.”
Brent crude for May gained 14 cents to $115.10 a barrel at 0546 GMT (1:46 a.m. ET), less than $5 from a 2-1/2-year high near $120 reached last month. U.S. crude for May, the most liquid contract before the expiry of April later on Tuesday, shed 3 cents to $103.06.
Libyan rebels, who had been driven back toward their eastern Benghazi stronghold before the air attacks halted an advance by Gaddafi’s forces, have so far done little to capitalize on the campaign — raising fears the war could grind to a stalemate.
Oil prices rose about 1 percent on Monday, the first day of trading after U.N.-backed western powers kicked off a military campaign in Libya. Total crude trading volumes remained well below average, continuing last week’s trend and underscoring the uncertainty facing the market, brokers and analysts said.
Venezuela’s Oil Minister Rafael Ramirez said there was no need for an emergency OPEC meeting despite the military attacks on Libya. Some of the group’s members have already increased production partly to compensate for the disruption to Libyan supplies.
But turmoil is also reaching countries close to Saudi Arabia, the world’s top oil exporter and home to most of OPEC’s spare production capacity.
YEMEN, SYRIA UNREST
In Yemen, top generals, ambassadors and some tribes threw their support behind anti-government protesters in a major blow to President Ali Abdullah Saleh’s efforts to ride out demands for his immediate exit.
Meanwhile, unrest spread in southern Syria with hundreds of people demonstrating against the government in three towns near the main city of Deraa, but authorities did not use force to quell the latest protests.
In Japan, smoke and steam rose from two of the most threatening reactors at Japan’s quake-crippled nuclear plant on Tuesday, suggesting the battle to avert a disastrous meltdown and stop the spread of radiation was far from won.
Away from the plant, mounting evidence of radiation in vegetables, water and milk stirred concerns among Japanese and abroad despite officials’ assurances that the levels were not dangerous.
Japan will allow the release of an additional 22 days worth of crude oil from privately held reserves, the trade ministry said. The trade ministry had already allowed the release of 1.26 million kilolitres from reserves, or three days worth of demand, last week.
Also supportive to products values were analyst expectations that weekly reports on U.S. oil inventories will show gasoline and distillate stockpiles fell last week.
Industry group the American Petroleum Institute will publish inventory statistics for the week ended March 18 on Tuesday, followed by U.S. government data from the Energy Information Administration on Wednesday.