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Libyan Oil Supplies Cut – Markets React

February 24, 2011

As much as 1 million barrels of Libya’s daily oil production may have been shut, Barclays Capital said in a report yesterday. Goldman Sachs estimated disruptions at 500,000 barrels a day.

Bloomberg reports: Feb. 24 (Bloomberg) — Crude in New York rose to the highest level in 29 months as Libya’s uprising reduced supplies from Africa’s third-biggest oil-producing country.

Futures climbed as much as 5.4 percent on estimates that Libya has lost as much as two-thirds of its oil output. The cuts create “significant upside risk” to prices and any further disruptions could create severe shortages, Goldman Sachs Group Inc. said. Futures extended increases after a U.S. government report showed a smaller-than-forecast supply gain.

“The big fear is that the unrest will spread to other major oil-producing countries such as Algeria, or God forbid, Saudi Arabia,” said Adam Sieminski, chief energy economist at Deutsche Bank in Washington. “The big question now is what $100 oil will mean for the economy.”

U.S. crude-oil stockpiles climbed by 822,000 barrels to 346.7 million last week, a sixth straight increase, a weekly Energy Department report showed. A 1.1 million-barrel gain was projected, according to the median estimate of 15 analysts surveyed by Bloomberg News.

Gasoline inventories tumbled 2.8 million barrels to 238.3 million in the week ended Feb. 18, the first drop this year, the department said. Analysts forecast that stockpiles advanced 850,000 barrels last week.

“Gasoline supplies tumbled, but nobody is paying attention to inventories this week,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “All eyes are on the Middle East because Libya is on fire and it doesn’t look like the situation will improve anytime soon.”

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