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Oil and gasoline rise as Libyan unrest continues

By Staff | Mar 11, 2011

By SANDY SHORE AP Business Writer Oil prices rose slightly Wednesday as a key government report showed U.S. petroleum supplies increased last week. Energy traders meanwhile continued to watch developments in Libya, where weeks of unrest showed no signs of easing. Benchmark West Texas Intermediate crude for April delivery rose 39 cents to $105.41 a barrel in morning trading on the New York Mercantile Exchange. In London, Brent crude added $1.95 at $115.01 per barrel on the ICE Futures exchange. The report from the Energy Department’s Energy Information Administration showed crude oil supplies grew by 2.5 million barrels. That’s about what analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected. Gasoline supplies fell by 5.5 million barrels, almost twice the amount analysts forecast. Distillates, which include diesel and heating oil, shrank by four million barrels, also twice as much as analysts estimated. The nation’s refineries operated at 82 percent of capacity, slightly above expectations. With oil supplies abundant close to home, much of the focus remains on North Africa and the Middle East, and what may lie ahead for global supplies there. Anti-government unrest has shut down most of Libya’s 1.6 million barrels per day of crude production. Traders are concerned that uprisings could spread to Saudi Arabia, the world’s largest crude exporter. Saudi Arabia has increased production to make up for a drop in Libyan exports, but that is cutting into its surplus supply. “Should another country on the scale of Libya also exit the market, Saudi Arabia’s spare capacities would be likely to fall to a critical level of less than two million barrels a day,” analysts at Commerzbank in Frankfurt said. Saudi Arabia controls much of the world’s spare oil production capacity — about 4.5 million barrels a day. That spare capacity is viewed as a buffer against soaring oil prices as demand picks up in the global economic recovery. Uncertainty about the Middle East prompted Bank of America Merrill Lynch to raise its 2011 WTI oil price forecast to $101 per barrel from $87, with Brent crude expected to average $122 a barrel in the second quarter. “Our base case assumes Libya will stay mostly offline for 6 months, limited oil infrastructure damage, no further oil supply disruptions in the region and modest global demand destruction,” the analysts said in a report. At the gas pump prices continued to climb, reaching a national average of $3.524 for a gallon of regular, according to AAA, Wright Express and the Oil Price Information Service. The highest prices ranged between $3.583 a gallon and $3.929 a gallon, primarily along the West Coast, and in Illinois, Maine and New York. The cheapest prices ranged between $3.215 a gallon and $3.411 a gallon and were found in the Rockies and parts of the Midwest. In other Nymex trading for April contracts, heating oil rose 6 cents to $3.0678 a gallon, gasoline gained 7 cents to $3.0164 a gallon and natural gas picked up 6 cents to $3.921 per 1,000 cubic feet.

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