NEW YORK—Crude oil prices surged toward the highest levels of the year Thursday as Libyan leader Moammar Gadhafi’s forces retook rebel-held territory.
New York’s main contract, light sweet crude for May, spiked $2.45 to close at $106.72 a barrel, not far off the March 7 peak of $106.95, the highest level since September 2008.
In London, Brent North Sea crude for delivery in May shot up $2.23 to settle at $117.36 a barrel.
Rich Ilczysyn at Lind Waldock said that the market was reacting to developments in the rebellion to oust Gadhafi in oil-exporter Libya.
“When NATO forces started bombing, people thought that would help resolve things. And we had reports that the rebels had made advances into two key ports for exporting oil,” he said.
“Then those rebels were pushed out by Gadhafi.”
The turn of events stoked concerns “that this is going to be much longer that we first imagined.”
Traders particularly were monitoring the changing frontline in the area of key oil hub Ras Lanuf, about 800 kilometers (500 miles) east of Tripoli.
“The rebels can’t seem to hold territory unless they have support of NATO and outside forces,” said Andy Lipow at Lipow Oil Associates.
“The fear is oil production is going to be offline for a significant period of time and that the resulting turmoil may result in a stalemate or a further escalation in the military action,” he said.
Adding to tensions in the market were upcoming elections in Nigeria, Africa’s largest oil producer, said Lind Waldock’s Ilczyszyn. “If you flash back a couple of years there was a lot of violence.”
Nigeria begins elections on Saturday amid uncertainty over a major overhaul of its oil industry that has led to a freeze in new investment despite relative calm in the restive Niger Delta region.
The legislative, presidential and governorship elections to be held over three successive weekends may have profound effects on the vital industry, which provides more than 90 percent of export earnings and some two-thirds of government revenue.