Oil Hovers Above $102

Oil prices hovered above $102 a barrel Tuesday as traders mulled how long Libyan oil exports will remain shut down after a third night of allied attacks on forces loyal to Moammar Gadhafi.

By early afternoon in Europe, benchmark crude for April delivery was down 16 cents to $102.17 a barrel in electronic trading on the New York Mercantile Exchange. The April contract, which expires Tuesday, rose $1.26 to settle at $102.33 on Monday.

Fierce fighting during the last month has halted most of Libya's 1.6 million barrels a day of crude production, and investors are concerned coalition military intervention on the side of rebels could prolong the shutdown of oil output from the OPEC nation.In London, Brent crude for May delivery was down 25 cents at $114.71 a barrel on the ICE futures exchange.

Goldman Sachs estimates that about $10 has been added to the price of oil from speculation that political unrest in the Middle East could spread to other countries and disrupt oil supplies

"These developments suggest that the $10 a barrel risk premium may prove too modest," Goldman Sachs said in a report.

Over the medium term, high oil prices could slow economic growth which in turn would reduce demand for oil, lowering the price, the bank said.

Other analysts, however, said the loss of Libyan oil output was already included in the current price range and, coupled with expectations of softer demand from Japan, could see prices slip.

"Short-term, we suspect that the crude oil market is somewhat overextended here, as the fighting in Libya will lose its ability to spark the market higher," said Edward Meir at MF Global in New York. "For all practical purposes, investors have reconciled themselves with the fact not much oil will be flowing out of Libya anytime soon."

Elsewhere, three senior Yemeni army commanders defected and joined a pro-democracy movement that wants the U.S.-backed president to step down while protesters in Syria clashed with riot police.

"Oil markets will likely not be that fazed by developments there, as Yemen is a relatively small producer, with production of about 300,000 barrels per day," Meir said.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.Markets are also on the watch for fresh figures on U.S. oil stockpiles.

Data for the week ending March 18 is expected to show a build of 2 million barrels in crude oil stocks and a draw of 2 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

In other Nymex trading for April contracts, heating oil fell 0.22 cent to $3.0503 a gallon and gasoline slid 0.68 cent to $2.9906 a gallon. Natural gas gained 3.9 cent to $4.20 per 1,000 cubic feet.

Source

City Power and Gas