On Monday, Brent crude, which closed at $113.93 a barrel on Friday, could target a February peak of $119.79 a barrel. U.S. crude, which closed at $101.42 a barrel on Friday may also extend last week's 4.2 percent gain, adding to concerns about inflation around the world.
"The Middle East and North Africa are a powder keg attached to a slow-burning fuse. The attacks on Libya and naval blockade, the troubles in Bahrain which are causing tension between Saudi Arabia and Iran, could cause the whole thing to blow up," said Jonathan Barratt, managing director of Commodity Broking Services.
"The key is really how Saudi and Iran play out. Cool heads need to prevail. It's contained at the moment but if things worsen, you see a Mid East premium very quickly. If they start exchanging fire, it could easily drive the market above the record high."
CRUDE UP 20 PERCENT IN 2011
Simmering tensions in North Africa and the Middle East, sparked by a revolt in Tunisia in January that spread to other nations including Egypt, Yemen, Bahrain and Libya have helped drive up oil prices by around 20 percent so far this year. Brent crude traded at almost $120 a barrel, its highest since a spike to just below $150 in mid-2008. So far in March, Brent has risen just 2 percent on expected lower demand following the Japan earthquake and eased on Friday after two days of gains, as Libya declared a ceasefire, easing the threat of further damages to oil facilities.
Oil production in the nation, the world's twelfth biggest exporter, has fallen dramatically since the unrest started -- down from around 1.6 million barrels per day to around 400,000 barrels.
Oil exports have slowed to a trickle, but they will likely dry up as military action continues. |
