Image: Libyan rebel fighters
Roberto Schmidt  /  AFP - Getty Images
Libyan rebel fighters hold their old national flag as they walk at sunset in the oil centre of Brega.
updated 3/7/2011 3:47:23 PM ET 2011-03-07T20:47:23

Oil prices continued to set new post-recession highs Monday as forces loyal to Moammar Gadhafi pounded rebels near a key oil port in Libya. It's unclear how long the country's oil exports will be cut off, and traders prepared for a worst-case scenario in which world supplies would be under pressure for months.

Benchmark West Texas Intermediate crude for April delivery gained $1.02 to settle at $105.44 a barrel on the New York Mercantile Exchange. The price almost hit $107 per barrel earlier in electronic trading, the highest level since Sept. 26, 2008.

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In London, Brent crude fell 93 cents to settle at $115.04 per barrel.

Libya, which sits on the largest oil reserves in Africa, has been engulfed in a four-week rebellion as militants try to oust Gadhafi after 41 years in power. Officials in the country say oil fields continue to operate, but daily exports of 1.5 million barrels could be cut off for some time.

On Monday, Libyan warplanes launched more airstrikes on rebel positions around the Ras Lanouf oil port as forces loyal to Gadhafi tried to keep rebels from advancing on his stronghold in the capital, Tripoli.

OPEC has ramped up production to make up for the loss of Libyan crude. The Financial Times reported Monday that Saudi Arabia, Kuwait, the United Arab Emirates, and Nigera are planning to put another 1 million barrels per day on the market.

Also, the Obama administration is evaluating whether to tap U.S. strategic oil reserves to slow the rising price of oil. A White House spokesman said officials will base that decision on a variety of factors, including the flow of oil to the U.S.

The government started to stockpile oil after the 1973 Arab embargo. The Strategic Petroleum Reserve, located in massive underground salt deposits in Texas and Louisiana, currently holds 727 million barrels of oil — enough to supply the U.S. for 37 days.

Releasing additional supplies and ramping up production could temporarily cool off overheated energy markets, but experts warned that it also would put a tighter squeeze on the world's oil as the global economy recovers and consumption rises.

"They'll remove the cushion of extra supplies," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Until this situation gets resolved, prices are going to continue to grind higher."

It also doesn't make sense to tap into the U.S. reserves right now, analyst and trader Stephen Schork said. The supply problem exists mostly in Europe, where many refineries rely on Libyan crude. In contrast, U.S. refineries have access to a relatively large supply.

The Energy Information Administration estimates OPEC can crank up production by another 4.7 million barrels per day. An extended shut down of Libya's exports would slice that capacity by about 32 percent to around 3.2 million barrels per day. Most of the world's spare capacity lies in OPEC nations, primarily Saudi Arabia.

"The question then is what else can happen," said Erik Kreil, who covers international energy markets for EIA. "If it gets worse in North Africa or the Middle East, production could fall further and you'll have less spare capacity."

Global spare capacity fell below 2 million barrels per day in 2008 before oil prices spiked to an all-time record of $147 per barrel.

In other Nymex trading on Monday for April contracts, heating oil lost 2.36 cents to settle at $3.0657 per gallon, while gasoline futures lost 4.25 cents to settle at $3.0039 per gallon. Natural gas rose 11.8 cents to settle at $3.927 per 1,000 cubic feet.

The Associated Press and Reuters contributed to this report.

Explainer: Overview of Libya's oil resources

  • Image: A Libyan oil worker, works at a refinery inside the Brega oil complex
    AP

    OPEC member Libya is the 17th largest producer in the world, third largest producer in Africa and holds the continent's largest crude oil reserves. It normally pumps around 1.6 million bpd, 85 percent of which is exported to Europe and its output is equivalent to about 2 percent of global oil consumption.

  • Libya's place in the oil producing world

    How the country measures up in crude supplies and production.

  • Exports

    Before the war, Libya was a net exporter with domestic consumption estimated at only around 270,000 bpd.

    Europe was most affected by Libyan oil export disruptions. About 28 percent of Libya's oil went to Italy, 10 percent to Germany, 11 percent to China and France and 3 percent to the United States.

    Libyan oil accounted for about 23 percent of Ireland's oil and about 22 percent of Italy's, according to the IEA.

    Around 13 percent went east of the Suez Canal to Asia.

    The shortfall from the loss of Libyan output was covered by alternative sources such as Nigeria and Azerbaijan, which produce similar light crude oils to Libyan oil.

    Saudi Arabia also brought some it its spare capacity online, according to Saudi sources. The kingdom promised to fill any supply gap caused by the unrest in Libya although it produces heavier crude with higher sulfur content than Libya.

  • Infrastructure

    Reuters

    Oil fields
    Most of Libya's oil fields are located in and around the Sirte Basin, in the northeastern part of the country, which contains around 80 percent of the country's proven reserves.

    Other key areas include the Ghadames Basin, about 240 miles south of Tripoli and Cyrenaica Basin in the northeast and the Murzuq oil field in the desert in the south of the country.

    Libya has five domestic refineries with a combined capacity of 378,000 barrels a day:

    Azzawiya Oil Refining Co
    Sarir Refining
    Sirte Oil Co
    Tobruk Refining
    Ras Lanuf Oil & Gas Processing Co

    Ports
    Libya exported various grades of light crude from six major terminals, five of which are located in the eastern part of the country, where protests erupted near the second city of Benghazi.

    Following are the eastern terminals with pre-war loading volumes in January, 2011 provided by the IEA.

    Es Sider 447,000 barrels per day
    Marsa El Brega 51,000 bpd
    Ras Lanuf 195,000 bpd
    Tobruk 51,000 bpd
    Zueitina 214,000 bpd
    Zawiyah 199,000 bpd (January exports)
    Oother unspecified terminals 333,000 bpd

  • Companies

    Image: Libyan oil worker, works at a refinery inside the Brega oil complex
    AP

    Libya's state company
    Under the Gaddafi regime, Libya’s oil industry was run by the state-owned National Oil Corporation (NOC), which was responsible for managing exploration and production sharing agreements with international oil companies. Along with smaller subsidiary companies, the NOC accounted for around 50 percent of the country's oil output.

    Foreign players
    Major oil companies operating in Libya include:

    BP (Great Britain)
    ConocoPhillips (United States)
    Eni (Italy)
    ExxonMobil (United States)
    Hess Corp (United States)
    Marathon (United States)
    Occidental Petroleum (United States)
    OMV (Austria)
    Repsol (Spain)
    Shell (United States)
    Statoil (Norway)
    Wintershall, a unit of BASF (Germany)

Video: Higher gas prices lead to increased food costs

  1. Transcript of: Higher gas prices lead to increased food costs

    ANN CURRY, co-host: We've also got some news you may not want to hear. If you're going to fill up your gas tank before you head to work today, bring along a little extra cash -- make that a lot -- because this morning AAA reports the new national average for regular unleaded is 3.51 a gallon. That's a 14-cent increase in just a week and 76 cents more than a year ago. We've got NBC 's Tom Costello at a gas station in Reston , Virginia , with more on this. Hey, Tom. Good morning.

    TOM COSTELLO reporting: Ann , good morning. There are 3.52 behind me, pretty close to the national average. You know, we as a nation consume 20 million barrels of oil every day. Half of that goes to our vehicles. And so now with the global economy recovering, we're all drinking, consuming more fuel. Awfully bad timing given the events in the Middle East . To a lot of Americans these days, the gas pump has the look and feel of a slot machine that just keeps taking your cash.

    Unidentified Man: It seems every time I come in the gas station , it's, like, 10 cents more or 15 cents more.

    COSTELLO: In fact, gas prices have jumped 15 cents in just a week, nearly 40 cents in a month. You may recall on Friday's TODAY show , Matt gave me some gas station marching orders.

    MATT LAUER, co-host: All right, Tom , you come back on Monday, you -- going to have you do every single neighborhood in the nation, OK?

    Well, this is as close as I could come without breaking the travel budget. Gasbuddy.com tracks the cheapest gas in your neighborhood, real time, with a heat map that color-codes gas prices across the country. Green means gas is in the 3.20 to 3.40 range. Yellow and orange gets you up to 3.70, and red means you're really getting squeezed, 3.80 and above. The Web site's visits have suddenly tripled.

    COSTELLO: In just the past few weeks we're looking at tens of thousands of downloads every hour of our smartphone app as motorists try to take back and save at the pump.

    Mr. PATRICK DeHAAN (Gasbuddy.com): California 's cleaner fuel laws are part of the reason gas prices are higher there, in some places nearing $5 a gallon. Now florist Mario Del Fante says he may have to raise delivery charges.

    COSTELLO: I know some shops already did that two months ago. But, you know, I resisted it. I was thinking, 'Oh, maybe it'll go away.' It didn't go away.

    Mr. MARIO DELFANTE ([shown on screen] Florist): And higher gas prices means everything gets more expensive. Airline tickets already up 60 to $100 over last year. Food prices up more than 2 percent in just a month with cereals, meat and dairy prices climbing the most.

    COSTELLO: I think $4 a gallon is bad news for the economy. It's a setback. It takes us back to where we were in 2008 .

    Mr. DANIEL YERGIN (CNBC Oil and Gas Analyst): Meanwhile, Forbes magazine is out with its list of where commuters are burning the most fuel. While the average commute in America is just over 25 minutes, the worst commutes are in California and metro Washington , DC , with commutes of 40 to nearly 50 minutes each way. All right, a little reminiscing. Back in 2000 we were paying a buck 56. In 2008 it went -- we averaged -- 2008 we averaged 3.32. Then the recession knocked a dollar off of it and the concern is we may now be headed back to the all-time highs, over $4 a gallon. That was in the summer of 2008 . Back to you.

    COSTELLO: All right, Tom Costello this morning. Not good news, but thanks for giving it to us anyway.

    CURRY: Without giving your age away, what's the lowest you remember paying for a gallon of gas?

    LAUER: Oh, I don't know. Two -- one -- I don't know, 1.89.

    CURRY: I......29 cents .

    LAUER: No.

    CURRY: Yes.

    LAUER: Seriously?

    CURRY: Twenty-nine , 30, 35 cents .

    LAUER: What are you, 105, what?

    CURRY: No. No, no. No, this is 1970s .

    LAUER: You're kidding. Twenty-nine cents a gallon?

    CURRY: I think so. Mark, right?

    LAUER: Yeah.

    MARK: Is that true?

    CURRY: Yeah?

    LAUER: Yeah.

    CURRY: It was a dollar ....

    MARK: Yeah.

    LAUER: I apparently was not old enough to drive.

    CURRY: Yeah.

    LAUER: All right.

    CURRY: A dollar when I was in college.

    NATALIE MORALES, anchor: Yeah. Yes. Natalie 's over at the newsdesk; she remembers

    LAUER: $3.05....

    A dollar when I was in college.

    MORALES:

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