Rise in Oil prices: Break The $100 Per Barrel Mark

Best Growth Stock – For the first time since 2008, oil prices hit a high of $120 a barrel from $98.10 a barrel, as on Wednesday. The major reason for the increase is attributed to the political chaos in Libya. This has affected the global markets as markets closed on a low note. Topping this is the fear that stock prices would dip further compared to the 2% dip this week. Following the economic crunch tipped by political convulsion in Libya, West Texas Intermediate crude for April soared 3.2% and rested at $101.41 a barrel. This amounts to 18% rise in West Texas Intermediate since 14th February.

Many foreign oil companies in Libya had to stop operations by suspending workers due to the political unrest in Africa’s third-largest oil producing nation. There is news that French oil giant Total has begun to wrap up business in Libya. Chaos in Tripoli, the capital city of Libya, increased on Wednesday and was augmented by protests in front of Government buildings. This saw a shut down in many oil companies, resulting in the shutdown of production of an estimated amount of more than 1 million barrels so far. Eni, an Italian company and one of the biggest oil producers of the country, alone produces about 2, 44,000 barrels of oil and gas in one day. Other foreign companies like Germany’s Wintershall, Spain’s Repsol and Austria’s OMV have also claimed to suspend or reduce production and evacuate employees.

European countries are said to feel the pinch of the oil production losses the most. Countries like Italy and Ireland imports 20-25% of their from Libya, whereas USA stands on a safer plank as its Libyan oil imports amount to only about 1 % of its entire crude financial imports.

The Libyan political unrest, now in its tenth day, shows no sign of control. The opponent party of Libyan leader Moammar Gadhafi has taken control over many cities of the country. But Tripoli still remains tense with protests, deaths and bloodshed. The agitation in Libya started after the recent unrest in Egypt, where anti-government protestors toppled the regime of Hosni Mubarak. Similar incidents in Tunisia this year have augmented the Libyan turmoil.

Analysts fear that the unrest could spread to Algeria, which lies east to Libya. This could hamper oil supply from both the countries, increasing the oil prices further to more than $220 per barrel. A cut off in supply of oil from these two countries would take off about 3.1 million barrels of oil per day from the world oil market, a recent research says. Such a scenario would take a toll on the spare capacity reserves of Organization of the Petroleum Exporting Countries (OPEC). OPEC countries had faced similar situations during the times of Gulf War in 2008, when oil prices had risen to $147 per barrel.

The increase in the oil prices have been triggered all the more by the concern that other major oil producing countries in the Middle Eastern regions may also fall prey to political chaos in coming times.