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Price of oil soars above $100 amid fears over Libyan crisis

Oil prices moved above $100 per barrel for the first time since 2008 Wednesday, driven by growing concerns about global supplies.
Traders work the crude oil options pit at the New York Mercantile Exchange Wednesday morning.Mary Altaffer / AP
/ Source: The Associated Press

Oil prices moved above $100 per barrel for the first time since 2008 Wednesday, driven by growing concerns about global supplies, as Libya's Moammar Gadhafi continued to lose his grip on the oil-rich country.

Similar uprisings in Tunisia and Egypt earlier this month already had markets on edge before protests escalated in Libya, which has the biggest oil reserves in Africa. The rebellion widened Wednesday as protesters overwhelmed government buildings and advanced around Tripoli, the capital.

West Texas Intermediate crude for April delivery jumped $2.68, or 2.8 percent, to settle at $98.10 a barrel on the New York Mercantile Exchange. Earlier in the day, prices hit triple digits for the first time since Oct. 2, 2008. WTI has soared 18 percent since mid-February.

In London, Brent crude added $5.47, or 5 percent, at $111.25 a barrel on the ICE Futures exchange.

French oil giant Total said it started to wind down its oil production in Libya, which produced an average of 55,000 barrels per day last year. That follows similar moves by other oil companies working in the country.

Libya's biggest oil producer, Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations. Germany's Wintershall said it suspended operations that produced up to 100,000 barrels of oil per day. Evacuations of oil company employees and their families continue.

Barclays Capital estimates that as much as 1 million barrels per day of production has been shut down so far. In January, Libya produced almost 1.7 million barrels per day of oil and natural gas liquids, according to the International Energy Agency.

The production losses will be felt mostly in Europe. Ireland relies on Libya for 23 percent of its oil imports and 22 percent of Italy's oil imports are from Libya. The U.S. imported only about 51,000 barrels per day from Libya, less than 1 percent of its total crude imports.

The International Energy Agency and Saudi Arabia have both pledged to make additional oil available to cover any shortfall in world supplies, but that hasn't eased tensions in oil markets.

Larry Goldstein, a director at the Energy Policy Research Foundation in Washington, said Libya's oil is a high-quality variety that produces valuable petroleum products like gasoline, jet fuel and diesel. Some refineries won't be able to run on Saudi Arabia's lower-grade crude, so a sustained shut down in Libya could start a bidding war for comparable kinds of crude.

"That would raise product prices immediately," Goldstein said.

Analysts say concerns about violence in North Africa and the Middle East have added a "fear premium" of about $10 per barrel of oil.

The rise has pushed retail gasoline prices higher in the U.S. despite ample supplies in most parts of the country.

Gasoline prices jumped 8.2 cents per gallon in the last month and $1.28 per gallon in the last year. The national average for a gallon of regular on Wednesday rose another 2.3 cents to $3.194 (84 cents a liter), according to AAA, Wright Express and Oil Price Information Service.

Looking beyond the unrest in Libya, analysts are watching similar protests in Bahrain, a tiny country about 15 miles (25 kilometers) from Saudi Arabia. Barclays analyst Helima Croft said the uprising in Bahrain could spill over to the eastern provinces of Saudi Arabia. While it probably won't hurt the Saudi's huge oil-production operations, "it's going to make a lot of people nervous," Croft said.

Shares of major oil companies rose in Wednesday trading. Exxon Mobil gained $1.89, or 2.2 percent, at $87.33. ConocoPhillips added $2.07, or 2.7 percent, at $78.68. Chevron rose $2.29, or 2.3 percent, to $102.61. Occidental Petroleum rose $1.28 to $103.42.

In other Nymex trading in March contracts, heating oil added 11.3 cents to settle at $2.9166 per gallon and gasoline gained 12.1 cents to settle at $2.8677 per gallon. Natural gas picked up 2.9 cents to settle at $3.936 per 1,000 cubic feet.