Business

Oil prices rise as Libyan unrest continues

Libyan rebels firing
Image caption Unrest in Libya has seen foreign workers flee the country, affecting oil production

US crude oil prices have hit a new two-and-a-half year high amid fears Libya could be facing a full-blown civil war.

US light crude rose by $1.95 to $106.75 a barrel, the highest since September 2008, before falling back sharply.

Brent crude gained $2.43 to $118.4, close to recent highs, before it also slipped back.

The latest price spike follows reported air strikes near the oil terminal at Ras Lanuf, which finds itself on the front line of military conflict.

The opposition ruling council in Libya warned on Monday that they feared Muammar Gaddafi would soon bomb oil facilities in his attempt to retake control of the east of the country.

Edgy stock markets

Meanwhile, European stock markets in London, France and Germany closed very slightly down, although Wall Street opened higher.

However, Asian stock markets saw selling earlier in the day on fears rising energy prices could derail the global recovery, with the Nikkei ending the day 1.8% lower, and Sydney and Bombay down 1.3% each.

An exception was the Shanghai Composite index, which ended the day 1.8% higher, largely due to a surge in the value of energy companies, including a 10% jump in China Shenhua Energy Company.

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Middle Eastern markets remained stable, with the Saudi stock market rallying 3.1% in late trading on Monday.

The Tadawul All Share Index had been down 21% since the beginning of troubles in Libya last Wednesday, but it has since recovered and is now only 10% down.

There have been calls online for a "day of rage" in the critical oil producer this Friday.

Meanwhile, shares in Oman - which has also witnessed violent clashes with protesters in recent days - ended the day 1.8% lower.

Fear factor

The US has indicated that it is considering tapping its oil reserves as one way to help ease soaring prices.

But even that news failed to calm the markets as investors remained jittery about the unrest spreading to other oil-producing nations.

"The concern is that with what we are seeing in Libya, it's purely fear driving the market," said Jonathan Barratt of Commodity Broking Services.

"Each time the price moves up a little, people are forced into the market. Once it's feeding itself, it will continue to rise," he added.

Mr Barratt said US crude prices could peak at $120 a barrel, even if further supply disruptions do not take place.