Oil hits US$100 per barrel

Price includes US$10 'fear premium'

Oil prices hit US$100 per barrel Wednesday as forces loyal to Libya's Moammar Gadhafi clashed with protesters, expanding their control over parts of that OPEC nation.

In afternoon trading benchmark West Texas Intermediate crude for April delivery was up US$3.48, or 3.7 per cent, at US$98.90 per barrel on the New York Mercantile Exchange.

Prices climbed as high as US$100 earlier in the day, hitting triple digits for the first time since October 2, 2008.

WTI has jumped 18 per cent since Valentine's Day.

In London, Brent crude added US$5.33, or five per cent, at US$111.11 per barrel on the ICE Futures exchange.

The rebellion in Libya, which has the most oil reserves in Africa, follows uprisings in other North African countries that have ousted leaders in Tunisia and Egypt.

As protests widened in Libya, French oil giant Total said it started to wind down its oil production in the country, which produced an average of 55,000 barrels per day last year.

That follows similar moves by other oil companies working in the country.

The country's biggest oil producer, Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations.

Barclays Capital estimates that as many as one million barrels per day have been shut down so far.

In January, Libya produced almost 1.7 million barrels per day of oil and natural gas liquids, according to the International Energy Agency.

The production losses will be felt mostly in Europe. Ireland relies on Libya for 23 per cent of its oil imports and 22 per cent of Italy's oil imports are from Libya.

The US imported only about 51,000 barrels per day from Libya, less than one per cent of its total crude imports.

The International Energy Agency and Saudi Arabia have both pledged to make additional oil available to cover any shortfall in world supplies, but that hasn't eased tensions in oil markets.

Larry Goldstein, a director at the Energy Policy Research Foundation in Washington DC, said Libya's oil is a high-quality variety that produces valuable petroleum products like gasolene, jet fuel and diesel. Some refineries won't be able to run on Saudi Arabia's lower-grade crude, so a sustained shutdown in Libya could start a bidding war for comparable kinds of crude.

"That would raise product prices immediately," Goldstein said.

Analysts say concerns about violence in North Africa and Middle East have added a "fear premium" of about US$10 per barrel of oil.

The rise has pushed retail gasolene prices higher in the US, despite ample supplies in most parts of the country.

Shares of major oil companies rose in Wednesday trading.

Exxon Mobil gained US$2.09, or 2.5 per cent, at US$87.53. ConocoPhillips added US$2.07, or 2.7 per cent, at US$78.68. Chevron rose US$2.83, or 2.8 per cent, to US$103.15. Occidental Petroleum rose US$1.90 to US$104.04.

In other Nymex trading in March contracts, heating oil added 12 cents at US$2.9250 per gallon and gasolene gained 12 cents to US$2.8704 per gallon. Natural gas picked up 4 cents at US$3.948 per 1,000 cubic feet.