Econintersect: Bloomberg reports the following oil prices at 5:00 pm, EST March 2:
- West Texas Intermediate (Cushing) Spot = $102.23, up 2.6%
- Dated Brent (London) Spot = $115.93, down 0.1%
- NYMEX Crude Future = $102.39, up 2.8%
The premium for Brent Crude over WTI Crude shrank by almost $3 from yesterday when it was $16.50. Brent usually sells at a premium to WTI, but the differential has been unusually high in the latest surge, presumably because of the greater reliance of Europe on middle east oil.
The Wall Street Journal attributes the increase today to fighting in Libya:
Markets fixated on news reports that forces loyal to Libyan leader Moammar Gadhafi launched an offensive in the oil-rich eastern part of the country but met heavy resistance from rebel soldiers. The oil-refinery city of Brega was a site of much of the fighting, according to the reports.
“The military activity going on is causing this market to erupt,” said Tony Rosado, broker at GA Global Markets in New York.
Many traders are fearful the unrest that has swept the Middle East and North Africa in recent months will lead to additional violence and disruptions to crude supplies in other countries.
Adding to those fears, the International Energy Agency said the conflict in Libya has caused more oil production to be shuttered than initially forecast. Between 850,000 and one million barrels a day of Libyan crude output has gone offline, the watchdog said. Last week, the IEA said between 500,000 and 750,000 barrels a day of Libyan crude-oil production had been disrupted.
The WSJ article contradicts the idea that European is more susceptible to oil production cutbacks in North Africa and the middle east than is the U.S. since the increased fear of disruption inEurope is not logical in the face of a large shrinkage in the Brent/WTI price differential.