Oil prices hit fresh highs on supply worries

Oil prices have hit new two-and-a-half year highs as worries continue about unrest in oil producing nations in north Africa and the Middle East.

The price of Brent crude settled up US$2.36 at US$121.06, after earlier reaching US$121.29.

US light, sweet crude rose 53 cents US$108.47, the highest close since September 2008.

Hopes of stronger growth in the US and supply problems in western Africa have also helped to push oil prices higher.

“Oil workers in Gabon have gone on strike again today which has hit production,” said Joel Hanley, managing editor at Platts.

“As a result the refineries are looking for barrels that currently aren’t there and it’s all pushing up the oil price.”

Supply fears

Production by Libya, which is the world’s 17th largest oil producer, with a 2% market share, has been almost completely shut down by the conflict there.

There were also reports on Monday that Libyan rebels were advancing towards the oil town of Brega in renewed fighting in the east of the country.

“In the short term, oil prices look very well supported,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

“The general market sentiment is positive, but we still feel that prices will come down later this year once the supply fears have dissipated.”

Opec

Iran’s oil minister also added to the pressure on oil prices by playing down the need for an extraordinary meeting of the Organisation of Petroleum Exporting Countries (Opec) to discuss whether to increase supply.

Iran currently holds the rotating presidency of Opec, which produces about 40% of world crude.

The organisation is not due to convene to discuss oil production until 2 June 2011, when its 12 member states will meet in Vienna, Austria.

Kuwait, one of the member countries, has said it believes the price of oil should be lower.

Farouk al-Zanki, chief executive of Kuwait Petroleum Corp, the country’s state oil company, has been quoted as saying US$90 to US$100 a barrel would be “the fair price” for crude.

Source: BBC News

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