Brent rises towards $117 as Gaddafi bombs Libyan oil storage tanks

SINGAPORE: Brent crude rose 0.5 percent towards $117 on Thursday, March 10 after forces loyal to Libyan leader Muammar Gaddafi bombed oil industry infrastructure, inflicting what could be longer-term damage on the country's exporting capacity.

Gaddafi's forces struck an oil pipeline leading to Es Sider and dropped bombs on storage tanks in the Ras Lanuf oil terminal area in the eastern section of Libya that is rebel-controlled. Rebels said government forces also hit an oil pipeline leading to Sidrah.

"The large explosions and enormous columns of smoke from storage tanks and other facilities in Ras Lanuf, close to the Es Sider terminal, are perhaps more than merely symbolic," Barclays Capital oil analysts headed by Paul Horsnell said.

"They represent a final fading of any residual realistic hope that the outage of Libyan oil could prove to be anything other than prolonged."

Brent crude for April gained 60 cents to $116.54 a barrel at 0224 GMT after soaring almost $3, or 2.5 percent, on Wednesday, from as low as $112.16. They reached a 2-1/2-year high of $119.79 on Feb. 24.


U.S. crude gained 44 cents to $104.82, after touching a 2-1/2-year peak of almost $107 earlier this week.

On Wednesday, U.S. crude fell after stockpiles at the pricing point for benchmark West Texas Intermediate at Cushing, Oklahoma, surged 1.7 million barrels to a record of almost 40.3 million barrels, according to the U.S. Energy Information Administration.

That caused the discount of WTI to European marker Brent to widen to almost $12 a barrel from about $8 the previous day.

Total U.S. crude inventories rose 2.5 million barrels last week, the EIA said, dwarfing the forecast for an increase of just 400,000 barrels in a Reuters poll. The weekly inventory data also showed drawdowns for gasoline and distillates were bigger than expected, reflecting improving demand.

Confirming previous non-Libyan estimates, Shokri Ghanem, chairman of Libya's National Oil Corp, said that production has been cut to about half a million barrels per day from 1.6 million bpd by the war, as many foreign and local workers have left oil fields.

Libyan oil trade has been paralyzed as banks decline to clear payments in dollars due to U.S. sanctions, though Austrian energy group OMV said it had been buying small amounts of Libyan crude oil and would continue to do so.

"It appears that most of Libya's bridges with OECD countries in particular are already aflame or may have already been burned," Barclays Capital said.

"One can now easily imagine circumstances in which Libya's previously very short-haul exports of crude oil become very long-haul indeed."

A Libyan insurgent said rebels had retaken the heart of the closest city to the capital from forces loyal to Gaddafi on Wednesday evening in some of the fiercest fighting in almost three weeks of clashes.

Saudi Arabia has increased production to 9 million bpd, almost 1 million bpd above its current OPEC target. The kingdom says it currently holds spare capacity of 3.5 mln bpd.

Still, an OPEC delegate said on Wednesday that the group saw no need for an emergency meeting to discuss raising output.

Saudi Shi'ites staged another small protest in the kingdom's Eastern province, defying a ban on demonstrations, but Foreign Minister Prince Saud al-Faisal said dialogue, not protest, was the best way to bring about change.

Saudi Arabia's ruling family has mobilised the power of its conservative religious establishment to prevent a wave of uprisings against Arab autocrats from roaring into its kingdom, home to more than a fifth of the world's known oil reserves. - Reuters