Oil could surge to $220 amid regional unrest
Prices will soar if North African exports slow or stop, but Opec and IEA say they will step in to address shortages
Dubai: Oil prices will see a further surge — all the way to $220 a barrel — this year if the political unrest in North Africa slows or halts exports from Libya and Algeria, analysts said.
Brent crude futures hovered near $110 a barrel yesterday as turmoil in Libya fuelled fears that unrest could spread to other oil-producing nations and choke supplies.
West Texas Intermediate (WTI) crude jumped to $98 a barrel in New York yesterday while spot Brent saw an increase to over $109 in London trading — their highest in more than two years — as Libyan leader Muammar Gaddafi vowed to fight until his "last drop of blood".
According to analysts at Nomura Holding, oil prices may surge to $220 a barrel this year if political unrest continues. "If Libya and Algeria were to halt oil production together, prices could peak above $220 a barrel," the bank said.
At the other end of the spectrum, Barclays Capital analysts said WTI prices may increase to an annual average of $106 this year from $91 last year. "At present, we do not expect a significant hit to oil supply, but such a scenario, if it were to materialise, would clearly be even more supportive for prices," BarCap analyst Paul Horsnell said.
Horsnell expects oil prices to continue rising well into the middle of this decade.
John Siddarth C.P., an analyst with Frost & Sullivan, said that if the crisis in the Middle Eastern countries continues, oil prices could touch $115 to $120 a barrel "within the next two weeks".
This would "risk the stability of the economy", as oil prices contribute to global inflationary pressures, he said.
The International Energy Agency (IEA) has indicated that it will dip into reserves if exports drop.
Saudi Arabian Oil Minister Ali Al Nuaimi said on Tuesday that the Organisation of Petroleum Exporting Countries will boost output if there is a shortage.
Opec member Libya produces 1.6 million barrels of oil per day. At least some 100,000 barrels per day, around 6 per cent of Libya's production, have already been shut in as companies batten their hatches in the face of growing unrest.
