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US crude oil hits 21/2-year high, Brent nears $120

By on April 6, 2011

Brent crude rose towards $120 a barrel and U.S. crude hit a 2-1/2-year high above $108 on Monday as unrest in the Middle East and North Africa kept the focus on oil supplies just as economic growth bolstered demand for fuel.

Comments by Iran’s oil minister that there was no need for the Organisation of the Petroleum Exporting Countries to hold an extraordinary meeting helped support prices.

Iran is OPEC’s leading oil price hawk and holder of the cartel’s rotating presidency in 2011.

ICE Brent rose $1.05 to a high of $119.75 a barrel, its highest since February 24, before slipping back to trade around $119.30.

U.S. crude was up 40 cents at $108.34 a barrel after touching $108.78 earlier in the year, its highest since September 2008.

Edward Meir, senior commodity analyst at brokers MF Global, said investors seemed to be in no mood to sell the markets despite the “less than compelling fundamental backdrop”.

Analysts say the loss of oil from Libya has been more or less offset by Saudi Arabia, while the Japanese crisis should also reduce oil import demand, suggesting “there likely is a statistical surplus in the system right now”, Meir said.

“However, participants are not bothered with data for the moment, as the focus remains on headlines from the Middle East. Moreover, the fact that global growth has yet to show any significant sign of decelerating is also keeping the “buy commodities” theme very much intact,” he added.

The government of Libya, the world’s 17th-largest oil producer and Africa’s third-largest, has sent an envoy to Greece to discuss an end to fighting, but gave no signs of any major climb down in a war that has grounded to a stalemate between rebels and forces loyal to Muammar Gaddafi.

Saudi Arabia and Kuwait both said on Monday that they thought oil prices should ideally be below current levels.

Farouk al-Zanki, Chief Executive of Kuwait Petroleum Corp, was quoted as saying $90 to $100 a barrel would be “the fair price” for crude.

A Saudi official told Reuters on Monday the country had not changed its view of the optimal level for oil prices and was still seeking $70 to $80 a barrel.

Carsten Fritsch, analyst at Commerzbank in Frankfurt, said oil prices could fall later this year if the political situation in the Middle East allowed worries over supply to ease.

“In the short-term, oil prices look very well supported,” he said. “The general market sentiment is positive. But we still feel that prices will come down later this year once the supply fears have dissipated.”

Oil got a boost at the end of last week from strong U.S. payrolls data. U.S. employment grew firmly for a second straight month in March and the jobless rate hit a two-year low of 8.8 percent, fuelling optimism about oil demand.

Source : Tribune