Oil climbed to its highest
level in two-and-a-half years on Friday as supply cuts stemming from
attacks on Libyan oil fields offset demand concerns spurred by a
major aftershock in Japan.
Brent crude surged to an intraday high of $123.65 a
barrel, the highest since August 2008. The front-month May
contract traded up 93 cents at $123.60 by 10.05am UAE time.
US crude rose 98 cents to $111.28, after touching a
peak of $111.39 earlier, the highest since September 2008.
Surging oil, along with record gold and food prices, have
stoked inflationary concerns for governments worldwide due to
the potential adverse impact on economic growth of the rising
cost of foodstuffs and raw materials.
"Oil prices are at a point where we could begin to see
demand destruction," said Mike Wittner, head of commodities
research at Societe Generale.
"It already looks like the United States may just be showing
some signs of demand destruction. The United States is always
the country where you see the impact the most because there are
no subsidies and hardly any tax burden."
Unrest in the Arab world has added a $20-25 premium to oil
prices since the toppling of regimes in Tunisia and Egypt in the
last few months, Wittner said.
The International Monetary Fund on Thursday said the global
economy was entering a period of scarcer oil, adding that
tighter fundamentals could cause price spikes rivaling the 2008
run-up that drove oil to nearly $150 a barrel.
In Libya, rebels and forces loyal to embattled leader
Muammar Gaddafi exchanged accusations over who had attacked oil
fields and infrastructure vital to both sides.
Rebels say government attacks on three different
installations in the east have halted production of the oil they
desperately need to finance the uprising against Gaddafi.
The seven-week old civil war has cut Libya's 1.6 million
barrels per day output by 80 percent to between 250,000 and
300,000, a senior government official said.
A tanker, Equator, sailed from the port of Marsa el-Hariga,
apparently with the first cargo of crude sold by rebels since
their uprising began in February. Oil traders said the cargo,
vital to fund the uprising, was headed for China.
"Obviously this sets a precedent, but we remain skeptical
that this will materially increase supply as resumption of
production still faces many obstacles," said J.P. Morgan in a
Fellow OPEC member Nigeria postponed parliamentary elections
again in some areas, but polls will go ahead in most of the
country on Saturday as planned.
Worries over OPEC supplies offset demand worries exacerbated
by a 7.4-magnitude earthquake that struck Japan, which is
recovering from last month's devastating quake and tsunami that
crippled a nuclear power plant and damaged some refineries.
Large parts of northern Japan were without electricity
following the latest of many aftershocks, the biggest since last
month's quake. However, there were no reports of major damage to
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