Oil prices keep rising on the Libya and Bahrain uprisings

Shia protest at Bahrain (see above), and there is concern that it could spill over to the minority of Shi'ite in the Eastern province of Saudi oil producers.  Photo: REUTERS

At least three oil companies stop output in the third largest producer of Africa, pump 1.6 million barrels per day (BPD) or almost 2pc global supply resulted in violent clashes in Libya.

Disturbance mark the first reduction in the supply of oil resulting from a wave of protests that swept Middle East and North Africa oil producers.

Investors fear for the potential impact on the flow of oil from first exporter Saudi Arabia if she suffers from similar problems.

In addition, International Energy Agency (IEA) Executive Director Nobuo Tanaka said that the price of oil over $100 per barrel for the rest of the year could tip the economy back in a repeat of the economic crisis of 2008.

"We are very concerned about the situation, it is a risk for the stable supply of petroleum," he said yesterday at the International Energy Forum in Riyadh.

US crude rose high sheath $ per barrel, the highest level since October 2008. Business morning in London, the April contract had trimmed gains to trade at $95.93, up to 2 5pc on the end of last night.

Brent crude, which is trade even more elevated the U.S. price jumped $ 1.26 $107.04 per barrel. Monday, Brent hit a 2 and half year high of $108.70.

"Even if the Libya stops completely, there is not a question of supply." "But brut (U.S.) could go to $100, taking into account the potential of this contagion to spread to Saudi Arabia," said Jonathan Barratt, CEO of Sydney freight Brokerage Services.

To date, events in Saudi have been low key. But Shia majority in neighbouring Bahrain are to protest against the Government of Sunni and fears it could spill over to the minority Shi'ite living in oil producers is the Saudi province.

"The importance of the Bahrain is perhaps being currently weakened." While not a major producer of oil, impact of Bahrain on the oil market is reflected through its importance in Saudi Arabia, "said Barclays Capital Helima Croft and Amrita Sen analysts in a research note.

Supplies of natural gas also felt the impact of the Libya disorders as a pipeline carrying Libyan gas in Italy has been closed.

Brent crude has increased by almost 5pc 12 so far this year. U.S. crude is just below the year 5MC but it is more than $50 below its 2008 high of $147.27.

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Oil prices rising soaring to $120 per barrel Middle East concern

At the same time, light crude sweet from NYC in April, known as West Texas Intermediate (WTI), rose to $103.41, a level last seen in late September 2008.

"Oil prices continued to surge higher Libya events dominated headlines and the oil market", said Westhouse Securities analyst Dave Hart.

"Leaving the country of high-quality crude is being significantly affected due to the exodus of foreign personnel."

Brent jumped high $119.79 per barrel at the beginning Thursday, return to approximately $113.53 through the middle of the morning. NY crude was higher at $100.72 $2.67 per barrel.

The King of Saudi Arabia last night announced $36bn (£ 22bn) additional benefits for his people to try to stop the wave of uprisings Arab extends to largest exporter of oil in the world.

Market analysts warns also Brent crude could hit $220 per barrel.

Nomura said oil prices products team is likely to unexplored highs of storage for the next few weeks if political unrest spreads in Algeria, reduction in capacity of world reserve margins thin light just before the first Gulf war.

Prices on the part of the world and copper fell for the fourth consecutive day, as investors reduce their exposure to risk while the sanctuary of gold, Swiss francs and US Government bond pink price.

Disturbance arising from the revolt in the global exporter No. 12 Libya cut at least 400,000 barrels per day (BPD) output bpd countries 1.6 m, according to Reuters calculations.

Soaring oil prices threatens to put an end to the recovery in advanced economies and add other inflationary pressures in booming emerging markets.

According to UBS, an increase of $10 of oil prices will shave 0.3 percentage point by global growth.

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Rising UK Wholesale Gas Prices:

Over the past week a series of factors forced UK wholesale gas prices to go up.  There are rumours that Norway are planning to divert Europipe 1 supply to Germany, also unexpected operational problems from ConocoPhillip’s Theddlethorpe gas terminal, amongst other factors such as Belgian LNG tankers redirected to Japan, PX’s Teesside plant scheduled maintenance outage in September and Qatargas rolling maintenance over the coming months are all contributing in the rise in UK wholesale  gas prices.

Wholesale Gas Prices for Monday’s delivery rose 0.55 pence to 57.10 pence per therm and Tuesday’s gas traded 1.10 pence higher at 57.75 pence.

British gas for October’s delivery rose 0.70 pence to 65.50 pence, while November’s gas increased to 72.75 pence.

Another factor that weighted on UK gas contracts on the far end of the curve was the recession fears in America. Winter 2011/2012 gas contract’s firmed at 73.85 pence up 0.35 pence, while winter 2012/13 gas shed 0.60 pence at 74.60 pence, guided by falling crude oil prices.

Meanwhile, a letter leaked from the Prime Minister’s senior policy adviser on energy and environment. warned that current policies could add 30% to consumer energy bills by 2020. According to Ben Moxham’s letter wholesale gas prices will play a major role in these rises.

“If gas prices are low in 2020, the cost of policies promoting nuclear and renewables would be high, he says, and it would not be cost effective to pursue these policies.  If however, gas prices are high, reliance on nuclear power and renewables “could conceivably” be better for consumers.” – writes Mr. Moxham.

According the Mr. Moxham’s letter there are four policies that stand out as having the most significant impact on household and business energy bills: carbon pricing (both out own carbon price floor and the EU emissions trading scheme), the new Energy Company Obligation, our Electricity Market Reform package and the Renewables Obligation.

For further information: Telegraph | www.decc.gov

If you would like more information on our range of UK Wholesale Gas Prices or would simply like to find out how we could benefit your business, simply call our energy team today on 0870 710 7560 or request a call back at time to suit.

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Eurozone debt crisis spreads to Belgium on rising political risk

The country has been limping along with caretaker ministers since Flemish separatists emerged as the biggest party in June. Talks have broken down over the scale of subsidies to the poorer French-speaking areas, making Belgium a microcosm of EMU's North-South divide.

It is unclear whether the political system can muster the discipline of the early 1990s when Belgium came back from the brink of a debt compound spiral with an impressive fiscal squeeze.

"We believe Belgium's prolonged domestic political uncertainty poses risks," said S&P. "Belgium's current caretaker government may be ill-equipped to respond to shocks to public finances. If Belgium fails to form a government soon, a downgrade could occur, potentially within six months."

Spain also faced fresh debt woes at an auction on Tuesday. The yield on €2bn (£1.7bn) of one-year bills jumped to 3.4pc, up 100 basis points in a month. "It was pretty dire," said David Owen from Jefferies Fixed Income.

Mr Owen said the surge in yields on US Treasuries is causing the cost of capital to jump across the global system, including Spain. "This is raising the bar for everybody," he said.

While Spain can still borrow at a manageable cost, it is storing up rollover risk by issuing debt at short maturities. The IMF said Spain must refinance €220bn this year. Moody's this week raised its estimate of Spanish bank losses to €176bn, up from €108bn a year ago.

Jean-Claude Trichet, head of the European Central Bank (ECB), said a "quasi-fiscal union" may now be required to stabilise the eurozone's debt markets, adding the EU's €440bn rescue fund should be deployed with "maximum flexibility", and beefed up in "quantity and quality".

Mr Trichet hopes to prod political leaders into authorising use of the fund for pre-emptive purchases of bonds, perhaps from Spain, relieving the ECB of its lonely burden. The ECB has been stuck with the task of propping up the banks and debt markets of peripheral Europe, conducting a fiscal rescue without a legal mandate and on slender resources.

Officials are mulling plans to raise the ECB's capital to cope growing liabilities, which means asking member states to provide fresh money. Its capital base is just €5.8bn, compared with the US Federal Reserve's $57bn (£36bn).

Toby Nangle, from Baring Asset Management, said the ECB may already be insolvent under strict accounting rules. "Could the international financial system cope with a bankrupt ECB? The fact that it is not easy to dismiss this out of hand is cause for great concern," he said.

The agenda for this week's EU summit shows that the EU plans to slipping through the creation of its new permanent rescue fund from 2013 without the need for a fresh treaty, using the "simplified revision procedure" of Article 48.

"We always feared the EU would stretch this clause to ratchet up their powers," said Mats Persson from Open Europe. "Article 48 can be used only if it does not expand the powers of the EU, but the crisis mechanism clearly does because it allows the Commission to make key decisions about the future of countries in trouble."

The IMF said Belgium does not have the luxury of cutting its budget deficit slowly, tightening to 4pc of GDP this year instead of 4.7pc to send a "strong signal" to markets.

Belgium has an oversized banking system with assets equal to 340pc of GDP and big state guarantees. Belgian banks, led by Dexia and KBC, have $54bn of exposure to Ireland alone, according to the Bank for International Settlements.

Belgium has a current account surplus and large private savings. However, the IMF said suffered a big erosion of labour competitiveness against Germany since 2000, and now faces a major aging shock.

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