Oil tops $110 after Japan suffers another blow

Oil pricesClick the chart for more on oil and other commodities By Ben Rooney, staff reporter


NEW YORK (CNNMoney) -- Oil prices jumped above $110 a barrel, a fresh 2-1/2 year high, after Japan was hit with another major earthquake.

May oil futures settled up $1.47, or 1.4%, to $110.32 a barrel. Prices had jumped as high as $110.44 -- a level not seen since September 2008.

The gains came after a 7.1-magnitude earthquake occurred around 10:30 a.m. ET, near the same location off the coast of Japan as the March 11 earthquake.

Japan's news agency NHK issued a tsunami warning for roughly the same area that had been deluged by water less than a month ago. The tsunami warning was lifted two hours later, with no reports of major damage.

NHK said the troubled Fukushima-Daiichi nuclear power plant did not experience any further damage from Thursday's earthquake.

But the second earthquake stoked fears about the long-term viability of nuclear power in Japan, and revived speculation about a short-term spike in energy demand as the nation rebuilds, said Doug Roberts, chief market strategist for Channel Capital Research.

"It also creates uncertainty in the market," he said. "And whenever there's uncertainty, people tend to build in a speculative premium."

The crisis at the Daiichi plant, where workers have been struggling to cool reactors and contain radioactive leaks, has heightened concerns about the safety of nuclear power in a country prone to violent seismic activity.

While Japan could use fossil fuels such as diesel to deal with temporary shortfalls in electricity, analysts said natural gas is a more likely substitute if the nation moves away from nuclear power over the long term.

Meanwhile, oil prices have surged some 20% so far this year as the political spasms in North Africa and the Middle East have raised worries about supply.

In Libya, oil production has been almost entirely halted for weeks amid a deadly stalemate between forces loyal to Moammar Gadhafi and rebel fighters.

Oil prices were also supported Thursday by signs that the European Central Bank is not about to embark on a long-term campaign to raise interest rates, said Tom Pawlicki, an energy analyst at MF Global.

In a widely expected move, the ECB raised its key interest rate Thursday to 1.25%.

In a press conference following the decision, ECB President Jean-Claude Trichet said the hike was necessary to "firmly anchor" rising prices, adding that interest rates are still low, "very accommodative" and able to spur further economic growth.

Looking ahead, Pawlicki expects the market to hold Thursday's gains, although he said Japan will probably not be the main driver going forward.

"I think the rally will be sustained but the reasons will probably change," he said. "The market will refocus on the Libya stalemate and expectations that low interest rates will be maintained." 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 fixed4.41%4.44%
15 yr fixed3.33%3.31%
5/1 ARM3.34%3.55%
30 yr refi4.39%4.41%
15 yr refi3.31%3.30%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,435.28 10.43 0.06%
Nasdaq 4,105.87 19.64 0.48%
S&P 500 1,867.82 5.51 0.30%
Treasuries 2.72 0.08 3.19%
Data as of 2:37pm ET
Company Price Change % Change
Bank of America Corp... 16.18 0.05 0.34%
Facebook Inc 59.30 -0.42 -0.70%
General Electric Co 26.70 0.58 2.23%
Micron Technology In... 24.06 1.57 7.01%
Cisco Systems Inc 23.18 0.15 0.66%
Data as of 2:22pm ET

Sections

New service lets anyone transfer money up to $900 from one Walmart to another in the U.S. for a fee of $9.50. More

Obama's proposed budget would raise $1.4 trillion more revenue and increase noninterest spending by $446 billion more than current policies, the CBO said in a new analysis. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. 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.