Oil Jumps Above $106 Amid Fierce Libya Fighting

March 7, 2011 - 7:25 AM

Singapore (AP) - Oil prices rose above $106 a barrel Monday in Asia as intense fighting between Libyan government forces and rebels raised the prospect of a prolonged cut in crude exports from the OPEC nation.

Benchmark crude for April delivery was up $1.71 to $106.13 a barrel, the highest since September 2008, at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained $2.51 to settle at $104.42 a barrel on Friday.

In London, Brent crude for April delivery was up $1.11 to $117.08 a barrel on the ICE Futures exchange.

Over the weekend, supporters and opponents of Libyan leader Moammar Gadhafi fought in several cities, heightening fears that the country is headed for a protracted conflict. Libya's oil output has fallen by at least 1 million barrels per day from 1.6 million since the uprising began last month.

Investors are also concerned violent protests and political upheaval could intensify in the Middle East, where Iran, Iraq, the United Arab Emirates, Kuwait, Bahrain, Qatar, Oman and Saudi Arabia have more than 60 percent of the world's proven oil reserves.

Citigroup said it raised its 2011 average forecast for Brent crude to $105 from $90, but doesn't expect the violent protests in North Africa and the Middle East to spread to Saudi Arabia, the world's largest oil exporter.

"We assume that output disruption is maintained through the second quarter," Citigroup said in a report. "Output disruption, or at least the threat of, will support a fear premium for the rest of 2011."

Some analysts expect the recent jump in oil prices -- up 26 percent since Feb. 15 -- will only have a negligible impact on inflation and economic growth in the U.S., the world's largest oil consumer.

"Oil above $100 will not send the economy back into a recession," Capital Economics said in a report. "The oil price would have to rise much further to seriously threaten the U.S. economy."

In other Nymex trading in April contracts, heating oil rose 2 cents to $3.11 a gallon, and gasoline gained 3.1 cents to $3.08 a gallon. Natural gas futures were down 4.4 cents at $3.77 per 1,000 cubic feet.