Oil up to $105 US on Libyan unrest

Worry that unrest in Libya could spread to elsewhere in the region or the Mideast continued to push prices for oil and other commodities higher Monday.

April crude closed up $1.02 to $105.44 US a barrel on the New York Mercantile Exchange. The price almost hit $107 a barrel earlier in electronic trading, the highest since Sept. 26, 2008. Brent crude — the European and Asian benchmark — traded lower on the ICE exchange, down $1.29 to $114.68 US a barrel.

Gold rose to a new all-time high of $1,445.70 US an ounce early in the session. April gold closed on the New York Mercantile at $1,434.50, up $5.90.

In Toronto, the S&P/TSX composite index ended down 160.42 points at 14,092.35.

The loonie was down 0.12 of a cent to 102.79 cents US.

Intense fighting between Libyan government forces and rebels has raised the prospect of a prolonged cut in crude exports from the OPEC nation. Over the weekend, supporters and opponents of Libyan leader Moammar Gadhafi fought in several cities, heightening fears that the country is headed for a protracted conflict.

Libya's oil output has fallen by at least one million barrels per day from 1.6 million since the uprising began last month.

Investors also are concerned violent protests and political upheaval could intensify in the Middle East, where Iran, Iraq, the United Arab Emirates, Kuwait, Bahrain, Qatar, Oman and Saudi Arabia have more than 60 per cent of the world's proven oil reserves.

"It is essentially the fear of the unrest spreading across the entire region which is pushing oil prices up," said Commerzbank in Frankfurt.

"Northern Africa and the Middle East produce more than one-third of the global supply of crude oil."

"The market is concerned over the high cost of energy and whether it will slow down the world's growth," observed Bob Tebbutt, vice-president at Peregrine Financial Group Canada.

Citigroup said it raised its 2011 average forecast for Brent crude to $105 from $90, but doesn't expect the violent protests in North Africa and the Middle East to spread to Saudi Arabia, the world's largest oil exporter.

"We assume that output disruption is maintained through the second quarter," Citigroup said in a report. "Output disruption, or at least the threat of, will support a fear premium for the rest of 2011."

Some analysts expect the recent jump in oil prices — up 26 per cent since Feb. 15 — will only have a negligible impact on inflation and economic growth in the U.S., the world's largest oil consumer.

"Oil above $100 will not send the economy back into a recession," Capital Economics said in a report. "The oil price would have to rise much further to seriously threaten the U.S. economy."

Nonetheless, President Barack Obama's chief of staff said Sunday that the administration was evaluating the possibility of tapping into the country's strategic oil reserves — totaling 727 million barrels — as a way of contending with rising gasoline prices.