NEW YORK—Crude oil prices spiked higher Wednesday as violent clashes in Libya between leader Moammar Gadhafi’s forces and the opposition stoked concerns about the country’s oil production.
Benchmark WTI light, sweet crude oil for April delivery settled at $102.23 on the New York Mercantile Exchange, a steep $2.60 rise from Tuesday’s close.
The West Texas Intermediate futures contract surged toward last week’s peak above $103, a level last seen in 2008. In two days of trading, the contract has gained $5.23.
In London, Brent North Sea crude for delivery in April advanced 93 cents to $116.35 a barrel.
“The market is extremely nervous and prices continue to climb,” said Tom Bentz of BNP Paribas.
The situation in Libya grew increasingly tense, with the embattled Gadhafi warning that thousands would die if the West intervenes to support the uprising against him.
The oil market was particularly unnerved by his attacks on the strategic eastern oil port of Brega, home to major petroleum operations.
The International Energy Agency said Wednesday that more than half of Libya’s oil production is not making it to the international market amid the uprising.
The IEA revised upward its estimate of Libya’s shut-in oil capacity to between 850,000 and one million barrels per day, out of a total of 1.6 million barrels per day – mostly sent to European buyers.
It said that information received from European refineries indicated that there were enough reserves through the end of March.
But some analysts pointed out that the quality of oil from Saudi Arabia, the world’s biggest oil producer, differed from Libyan oil, which could pose problems for refiners.
“The Saudi light oil has about 1.0-1.5 percent sulfur in it and Libyan oil is between 0.0-0.5 percent sulfur, so it takes a very special, extremely low-sulfur crude to go in the refineries that have been using the Libyan oil,” said Adam Sieminsky of Deutsche Bank.
“The country that has the oil closest in quality is Nigeria,” he added.
Another factor moving prices was the weekly US reserves report, which showed Wednesday that crude oil stockpiles unexpectedly fell after a series of increases that had raised questions about weak demand in the world’s largest oil-consuming nation.
The US Department of Energy said crude oil reserves fell by 400,000 barrels to 346.4 million in the week ending February 25.
Reserves of gasoline and distillates also fell, but reserves at the Cushing, Oklahoma terminal, the country’s biggest oil depot which is nearly full, rose by 1.2 million barrels to 38.6 million.