- Title: UNITED KINGDOM/FILE: Libya unrest hits oil prices
- Date: 22nd February 2011
- Summary: TRIPOLI, LIBYA (FILE - OCTOBER 13, 2010) (REUTERS) SIGN READING IN ARABIC AND ENGLISH '5TH TECHNOLOGY OF OIL AND GAS EXHIBITION AND FORUM' PEOPLE AT LIBYA EXPO VARIOUS OF PEOPLE AT CENTRE EQUIPMENT ON DISPLAY 'TOTAL' EXPO STAND, POSTERS AND TOTAL OIL BARREL VARIOUS OF EXHIBITION EXTERIOR OF EXHIBITION
- Embargoed: 9th March 2011 12:00
- Location: Libya, United Kingdom
- Country: United Kingdom Libya
- Topics: International Relations,Energy
- Reuters ID: LVACU2UT84LABE4D6631OQWOO44Z
- Story Text: Oil prices charge to a fresh 2-1/2 year high as traders eye increasing violence in major producer Libya.
Oil prices charged to a fresh 2-1/2 year high on Monday (February 21) as traders eyed increasing violence in major producer Libya, feeding fears about rising inflation and unsettling other markets.
European equities fell on a combination of uncertainty over the future of the oil price, increasing signs that higher interest rates may be coming and more evidence of a surprisingly poor earnings season.
Together, they overshadowed reports of solid economic growth.
Gold powered to the highest levels in seven weeks, helped along by both inflation fears and risk aversion.
Protests broke out in the Libyan capital Tripoli for the first time following days of unrest in the city of Benghazi and some army units defected to the opposition in what has become one of the bloodiest revolts to convulse the Arab world.
Financial markets are particularly sensitive to the violence in Libya because it exports around 1.1 million barrels per day of crude.
Brent oil was up around two U.S. dollars (USD) a barrel at 104.47 USD, slightly below a new 2-1/2 year high hit earlier.
UK oil major BP has been readying an onshore rig in the west of Libya. The company intends to start drilling for oil and gas but escalating violence have forced it to suspend operations.
"We have operations there that are very, very limited, it is the early stages of exploration. We have some people there, who have left the country. We remain committed to business there, but again, we like everyone is, are watching this very carefully. It was very early stages for our business there though," said BP CEO Bob Dudley at a news conference in London on Monday.
The energy company, which has significant operations in Egypt, has continued businesses in the Middle East despite the often violent turmoil that has swept the region.
"We have had no interruptions with out businesses in the Middle East, but we, like the rest of the world, are concerned for the people in the Middle East and we are watching very carefully. We will always take care of our own employees, not just expatriates but national employees as well to make sure that their safety is in good shape. We have had no difficulties with any of our employees anywhere so far," Bob Dudley added.
Violence in Libya lends to uncertainty about supplies which markets do not react well to. Rising oil prices feed into inflation, one of the main current concerns of investors, who are otherwise in a generally bullish mood on expectations that the global economic recovery is now sustainable.
"I think it is a serious risk. It feeds back into inflation, inflation is clearly a problem in the emerging world already. That is one aspect to it, the other way to think about this really is that rising oil prices and rising food prices as well, are effectively a tax on consumption if your wages are not going up to compensate. And that is going to be the story in parts of the developed world. So I think we need to watch this carefully in terms of the implications for global growth," said Global Head of Macro Investment Strategy at HSBC, Philip Poole on Monday.
Core euro zone bond yields were lower as investors bought safer assets in the face of the Middle East and North Africa events.
Norway's Statoil, Austria's OMV and Royal Dutch Shell were among European oil and gas companies that evacuated staff and suspended drilling preparations in Libya.
Al Jazeera television reported on Monday that production from the Arabian Gulf Oil Company Nafoora oilfield had stopped because workers are striking, as violent unrest spread across the country which produces over one million barrels of oil a day.
Other Companies operating in Libya include ENI, JX Nippon, Exxon, Occidental, PGNiG, Gazprom, RWE, Sonatrach, Oasis Group, Petrobas, Statoil, Total.
- Copyright Holder: FILE REUTERS (CAN SELL)
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