Oil jumps above US$102 per barrel

Oil prices rose above US$102 per barrel Wed-nesday as fighting escalated in Libya and petroleum demand grew in the United States.

Libya, a major oil exporter to Europe, has been embroiled in a civil war that has shut down oil production in many parts of the country. Forces loyal to Libyan leader Muammar Gaddafi used airstrikes in a battle against protesters for control of a key oil installation in the eastern half of the country.

Benchmark West Texas Inter-mediate for April delivery added US$2.57, or 2.6 per cent at midday, to US$102.20 per barrel. In London, Brent crude added US$1.80 cents to US$117.22 per barrel on the ICE Futures Exchange.

Analysts are concerned that the rebellion will endanger Libya's oil fields, which produce 1.6 million barrels per day.

That's only about two per cent of global demand, but experts say the disruption is putting pressure on world supplies at a time when demand is picking up.

A Libyan oil minister said the production in the east had declined 50 per cent during the uprising, though international observers estimated that much more has been put on hold.

Significant reduction

The International Energy Agency said Wednesday that between 850,000 and one million barrels per day were shut in. That's up from its previous estimate of between 500,000 and 750,000 barrels per day.

Whatever the number, not much will be moving out of the country, analysts said.

Oil tankers that have made it to Libyan ports may simply be taking whatever excess supplies are available since the uprising began, Houston-based oil analyst Andrew Lipow said.

Libyan oilfields probably will be in danger for months with nobody in clear control of the country, Barclays Capital analyst Helima Croft said.

Months of issues

"They have a highly fractured army, so you could see security problems persisting for weeks or months," Croft said. "This could get really messy."

In the US, the government reported Wednesday that petroleum demand continues to rise from last year, and oil and gasolene supplies both dropped unexpectedly last week.

Since demonstrations spread to Libya, WTI has risen about 19 per cent, Brent about 13 per cent. The rise in oil prices continues to push US gas prices to new highs for this time of year.

The Energy Information Administration reported that oil supplies in the US fell by 400,000 barrels and gasolene inventories dropped by 3.6 million barrels last week as petroleum demand increased.

In other Nymex trading, natural gas for April delivery fell 6.5 cents to US$3.81 per 1,000 cubic feet. Natural gas prices typically fall at this time of year as the weather warms, and huge production increases in North America have helped push prices about 21 per cent lower year-over-year.