Oil prices push higher on Libya crisis, weaker dollar

NEW YORK—The price of oil crossed $109 a barrel in New York for the first time in two and a half years Wednesday amid concerns about the war in Libya and as the dollar weakened against the euro.

New York’s main contract, light sweet crude for May, closed at $108.83 a barrel, up 49 cents from Tuesday.

Earlier the benchmark West Texas Intermediate (WTI) contract hit $109.15 – a level last seen in September 2008.

London’s Brent North Sea crude for May delivery reached $123.37 a barrel – the highest level since early August 2008.

Brent settled at $122.30 a barrel, a gain of eight cents from Tuesday’s closing level.

“A key influence on the market has been a stronger euro,” said Matt Smith of Summit Energy, noting the correlation between a weakening dollar and dollar-denominated oil.

The dollar is at its lowest level since January 2010 against the euro. The decline in the greenback encourages investors to buy dollar-priced commodities in a bid to protect their capital from a loss in value.

“It has really been a support to crude despite a neutral report on the inventory” in the United States, Smith said.

Crude oil stockpiles rose by two million barrels last week, the US Department of Energy reported, bringing the total increase for March to more than 11 million barrels.

The build in stockpiles in the world’s biggest oil-consuming nation was in line with market expectations.

More generally, Smith said, “the market does not want to move lower while this uncertainty remains in the Middle East.”

“Brent crude oil continued its rally… as the political turmoil in Libya, Yemen and Bahrain raised further concerns about oil supplies in the area,” said Sucden analyst Myrto Sokou.

In Libya’s rebel-held east a tanker left the port of Tobruk on Wednesday carrying the first consignment of oil since the rebel government won recognition from some countries, an AFP journalist reported.

The Greek-owned, Liberian-registered tanker left a terminal near Tobruk, 130 kilometers (80 miles) from the Egyptian border. It had docked Tuesday to load Libyan crude worth up to $100 million.

It was the first shipment for which the rebels had taken full responsibility, from extraction right up to delivery, and was not simply a matter of filling previous orders.

It also was the first such exports since international coalition air strikes began on March 19, with rebels hoping to raise cash to finance their fight against leader Moammar Gadhafi’s forces.

Libya’s oil exports have slowed to a trickle amid the rebellion.

Bank of America Merrill Lynch said that a persistent rise in oil prices caused by unrest in Libya and the Middle East could slow global economic growth.

“Some additional upward pressure on commodities should not upset the economic recovery, as long as it is transitory,” it said in a market note.

However, “a persistent uplift in Brent crude oil prices above $130 this year could create severe economic damage,” it warned.