Oil prices surge 6% on Libya unrest

oil pricesClick chart for more on oil and other commodity prices. By Aaron Smith, staff writer


NEW YORK (CNNMoney) -- Oil prices jumped 6% Tuesday, spiking as high as $98 a barrel earlier in the session, as the crisis in Libya sparked concern that the turmoil roiling the Middle East could spread to other producing countries -- including Saudi Arabia.

U.S. crude for April delivery rose $5.71, or 6.4%, to settle at $95.42 a barrel in midday activity. The U.S. market was closed Monday for a holiday, although there was a 6% gain in international trading.

Unrest in Libya has entered its eighth day, fueled by protestors against high unemployment and dictator Moammar Gadhafi's 42-year reign. At least 233 people have been killed since protests began, according to Human Rights Watch.

Gadhafi appeared on state-run television in front of his Tripoli home, the damage still evident from a U.S. bombing in the 1980s, in response to Western news reports that he had fled the country.

"Libya will lead the revolution, will lead America, will lead Asia, will lead the whole world," said Gadhafi, 68, near a statue of a fist crushing an American war plane. "I will be a martyr until the end. Libya we have irrigated by our blood."

Gadhafi also told his fellow Libyans, "They defame your image, unfortunately, in Arab media that are serving the devil. They want to insult you."

"Now it's starting to look like the entire region's on fire, and it looks like it could spread to other parts of the region," said Peter Beutel, oil analyst with energy risk management firm Cameron Hanover. "This thing is getting worse and worse and worse, and it could spread to Saudi Arabia, and that's the big fear."

Libya's importance with regard to oil prices doesn't hinge so much on its oil-producing and exporting capabilities, said Beutel. To put things in perspective, Libya produces about 1.6 million barrels of crude per day, compared with Saudi Arabia's daily production of 8.4 million barrels and worldwide production of 87 million barrels, he said.

But now the monarchy of Saudi Arabia, one of the United States' strongest allies and an island of stability in an otherwise tempestuous region, faces an uncertain future.

"Markets have always relied on Saudi Arabia to act as the swing producer, boosting output if supplies were disrupted elsewhere," said Win Thin, global head of emerging markets strategy for Brown Brothers Harriman.

The International Energy Agency, an industry group based in Austria, said Tuesday that it "stands ready, as always, to make oil available to the market in the event of a major supply disruption if alternative supplies cannot readily be made available via normal market mechanisms."

And OPEC has also said it stands ready to hold an emergency meeting to raise its output if needed, according to news reports.

Beutel said that markets are shaken up over the growing realization that the "regional revolution," rather than being a reach for democracy, "will see more radical and extreme elements take over in succession."

The crisis and spike in oil has led to stock market anxiety. U.S. stocks have sold off amid the growing chaos.

Shortly before Gadhafi delivered his speech, Sen. John Kerry, chairman of the U.S. Senate Committee on Foreign Relations, denounced him and said the oil industry should shun him as an international pariah.

"The Gadhafi government's use of deadly force against its own people should mean the end of the regime itself," he said. "It's beyond despicable and I hope we are witnessing its last hours in power. All American and international oil companies should immediately cease operations in Libya until violence against civilians ceases."

But Beutel said these words will have no impact on the behavior of the international oil industry.

"There were people who were dealing with [Gadhafi] clandestinely when it was illegal," he said, referring to the embargo that was lifted in 2004. "There were people dying to jump back in bed with this guy the minute that it was open." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.22%4.16%
15 yr fixed3.32%3.24%
5/1 ARM3.52%3.35%
30 yr refi4.21%4.15%
15 yr refi3.31%3.24%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,294.44 28.45 0.16%
Nasdaq 4,568.40 -25.03 -0.54%
S&P 500 2,010.44 -0.92 -0.05%
Treasuries 2.59 -0.03 -1.29%
Data as of 12:51pm ET
Company Price Change % Change
Yahoo! Inc 39.68 -2.41 -5.73%
Bank of America Corp... 17.00 -0.04 -0.26%
Oracle Corp 39.60 -1.95 -4.70%
Microsoft Corp 46.82 0.14 0.30%
Apple Inc 101.62 -0.17 -0.17%
Data as of 12:36pm ET

Sections

Alibaba, the biggest IPO to ever hit Wall Street, made a huge splash in its debut on Friday. More

Scotland's clear rejection of independence has eased fears that it could suffer the kind of decline seen in Quebec after it failed to break away from Canada. More

Apple's new iPhone 6 and 6 Plus went on sale Friday, with fans lining up for hours outside Apple Stores around the world. More

Immigrant entrepreneurs leverage connections abroad to boost international exports -- and non-immigrants could stand to learn from their tactics. More

A 10,000 square-foot home doesn't take care of itself, and many of the uber wealthy families who own them don't want to tend to them either. So they hire people like Bryan Peele. Here are journal entries from a day in his life. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.