Oil rises after UN approves military force on Libya | Pakistan Today

Oil rises after UN approves military force on Libya

LONDON – Oil rose above $116 a barrel on Friday after the United Nations authorised Western-led attacks in OPEC member Libya and tension stayed high across the oil-producing Middle East. Efforts to subdue inflation in China, the world’s second biggest oil user after the United States, only briefly wiped out gains. Brent was up $1.19 at $116.09 a barrel by 1202 GMT, after earlier climbing above $117. U.S. crude for April gained $1.67 to $103.09.
Oil markets reached their highest in just over a week after the U.N. Security Council, meeting in emergency session on Thursday, passed a resolution endorsing a no-fly zone to halt government troops around 100 km (60 miles) from rebel stronghold Benghazi. The UN also authorised “all necessary measures” – code for military action – to protect civilians against Gaddafi’s forces. Libya pumped 1.6 million barrels per day (bpd) before conflict broke out earlier this year. Traders were trying to assess how long supplies might be disrupted and whether there could be even more serious supply outages in the Middle East.
“The apparent move into a military endgame in Libya, together with the passing of the U.N. resolution and the escalation created by external involvement, is likely to represent the most immediate source of upside price risk for oil,” Barclays Capital analysts said in a note. The situation remained volatile in Bahrain, where earlier this week the authorities cracked down on Shi’ite protesters demanding reform by the Sunni monarchy, drawing criticism from the United States and Iran. Sunni-ruled ally Saudi Arabia, OPEC’s largest oil producer, has sent troops into Bahrain, together with other forces from the Gulf Cooperation Council (GCC).
As it monitors unrest in its oil-producing east, home to its Shi’ite minority, Saudi Arabia on Friday announced a series of measures. Brent briefly turned negative after the People’s Bank of China increased the required reserve ratio for the country’s biggest banks by 50 basis points to a record 20 percent as part of the government’s campaign to dampen inflation. Although it could limit fuel demand, analysts predicted the impact on crude markets would be limited, compared with metals whose market direction is more dependent on Chinese consumption. “While credit rationing and higher interest rates do appear to have a noteworthy effect, these are relatively minor when compared to their impact on other commodities, especially the base metals,” said James Zhang, commodity strategist at Standard Bank.
Japan’s strongest earthquake on record a week ago and resulting nuclear crisis sent risk-averse sentiment coursing through global financial markets and has triggered some selling in volatile trade. Edward Meir, senior commodities analyst at brokers MF Global, said oil prices had risen too far considering the loss of demand from Japan, the world’s third largest economy and third biggest oil consumer after the United States and China.

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