Tags: Oil | Prices | crude | us | economy

Oil Prices Stay Below $100 as US Supplies Grow

Thursday, 24 Feb 2011 10:02 AM

Oil prices rose again Thursday as the rebellion in Libya appeared to have shut down even more crude production than previously estimated.

Italy's Eni, the largest oil producer in Libya, said the violent uprising has taken 1.2 million barrels per day off the market, up from previous estimates of about 1 million barrels per day. Most of that oil is exported to Europe, but it will push prices up everywhere by increasing competition for similar varieties of higher-quality crude used to make gasoline and jet fuel.

In the U.S., benchmark West Texas Intermediate crude rose $1.67 to $99.77 per barrel on the New York Mercantile Exchange. Prices have jumped 18 percent since Friday. In London, Brent crude added $2.95 at $114.20 on the ICE Futures exchange.

At the pump, gasoline prices rose more than 2 cents on Thursday to a new national average of $3.228 per gallon. A gallon of regular is 11.8 cents higher than it was a month ago and 55 cents more than the same time last year, according to AAA, Wright Express and Oil Price Information Service. Experts estimate that the national average could rise as high as $3.75 by spring.

Gasoline costs an average $3.60 per gallon in California and $3.44 per gallon in New York. The cheapest gas could be found in Wyoming, at an average of $2.998 per gallon.

Oil prices are climbing even though the world's largest oil consumer, the U.S., has large supplies of both oil and gasoline. The Energy Information Administration reported Thursday that oil supplies in the U.S. grew last week by 800,000 barrels. That's less than analysts expected, but supplies are still well above average for this time of year. Gasoline supplies fell by 2.8 million barrels last week.

"It doesn't matter what the supply is here," analyst and trader Stephen Schork said. "America is in competition with Europe and Asia and everywhere else for oil. And when there's a shortage somewhere, it pushes prices everywhere else."

With no clear outcome in sight, Schork said the violence in Libya has put a "fear premium" of about $15 to $20 per barrel on oil prices. That premium is currently flowing through energy markets, pushing gasoline prices to the highest levels ever for this time of year.

Oil and gasoline prices will likely hold at elevated levels as long as Libya's future remains uncertain, said Michael Lynch, president of Strategic Energy & Economic Research. Prices should fall again once order is re-established. Libya relies on oil revenues and it will need to keep operations running no matter who is in charge, he said.

"It doesn't look like there's any real damage to Libya's oil fields," Lynch said. "So once there's a government in place everything could get back up and running within a few weeks."

If protests subside in the region, oil prices could eventually fall to where they were earlier this month, pulling pump prices down anywhere from 30 to 40 cents per gallon, Lynch said.

In other Nymex trading in March contracts, heating oil rose 4 cents to $2.9603 per gallon and gasoline added 6 cents at $2.9305 per gallon. Natural gas lost 10 cents at $3.842 per 1,000 cubic feet.

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Oil prices rose again Thursday as the rebellion in Libya appeared to have shut down even more crude production than previously estimated. Italy's Eni, the largest oil producer in Libya, said the violent uprising has taken 1.2 million barrels per day off the market, up from...
Oil,Prices,crude,us,economy
533
2011-02-24
Thursday, 24 Feb 2011 10:02 AM
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