Crude Oil Prices Soar on Fears of More Disruptions
Just when oil markets appeared to be calming, crude prices surged again on Tuesday as the potential for more oil shipment disruptions spread across the Middle East and North Africa. With Libya’s oil exports almost entirely halted for the last several days, renewed unrest in Oman, Iran and Iraq rattled oil traders. An interruption of shipments from any of those countries would further tighten oil supplies, even as Saudi Arabia has rushedsupra store to fill the vacuum of Libyan supplies by pumping more oil from its fields. Gold prices also surged on the latest reports, and indexes on Wall Street declined sharply, with the Dow Jones industrial average down more than 1.1 percent. In the latest sign that the political contagion was spreading, demonstrators in Oman on Tuesday tried to block a major road leading to the industrial port town of Sohar. Protesters in recent days have set fire to at least one police station and two government office buildings in the normally stable Persian Gulf country, which is ruled by a family dynasty and is the largest non-OPEC oil producer in the Middle East. “To have protests in Oman, which had previously been seen as a sleepy gulf kingdom, heightens concerns that nowhere is immune from the contagion affects,” said Helima L. Croft, a director and senior geopolitical analyst at Barclays Capital. “Every day we seem to have a new country with a new problem.” Oman produces 860,000 barrels of oil daily, roughly 1 percent of world supplies, and its production has been rising in recent years with investments from Royal Dutch Shell, BP, Repsol and other international companies. Its importance is magnified by the fact that its crude is of such quality that it can be blended by most refineries around the world, although most of its exports now go to China and Japan. Oman straddles the Strait of Hormuz, a strategic route through which 40 percent of the world’s oil tanker traffic crosses. On the other side of the strait lies Iran, another major producer, where there were reports on Tuesday that security forces had used tear gas to disperse protesters in Tehran. In afternoon trading, the price of light sweet crude rose more than 2 percent to $98.99 a barrel while Brent crude rose 2.5 percent to $111.94. Oil jumped above $100 a barrel in after-hours trading in New York. The national average price for a gallon of regular gasoline rose by nearly a penny on Tuesday to just over $3.37, which is 20 cents higher than a week ago. The rising tensions across the region also sent the Saudi Arabian stock market into a tailspin, with Saudi shares suffering the biggest daily decline in more than two years despite rising oil prices. The Saudi index fell 6.8 percent, to its lowest close since July 2009. Refiners around the world have been hoping that Iraq, as violence ebbed, would again become a major oil producer, with production stabilizing at 2.3 million barrels a day. But over the weekend rebels bombed the country’s largest refinery, seriously damaging an operation capable of producing 310,000 barrels a day of refined petroleum products. The attack came less than three weeks after a terrorist attack on a pipeline leading to a second refinery north of Baghdad.