"The ongoing tensions in Libya continue to support the oil market, providing some upside momentum," said Sucden analyst Myrto Sokou. Air strikes against Libya by US, British and French fighters continued to press the markets after an uprising last month forced the closure of more than three-quarters of the country's crude production. Oil-rich Libya was producing 1.69 million barrels a day before the unrest, according to the International Energy Agency. It is now producing 400,000 bpd.
"The issues of Libya and Yemen have been driving prices of crude oil up, although Yemen is a small exporter and Libya has been more significant," noted John Vautrain of Purvin and Gertz energy consultancy.
"The situation is probably going to last for a while," Vautrain told AFP. Popular uprisings have already toppled the leaders of Tunisia and Egypt and are now threatening similar change in Libya and Yemen while there have also been anti-government movements in Bahrain, Iran, Saudi Arabia, Syria and Yemen.
"The air strikes against Libya over the weekend by Western powers could lead to unchartered fluctuations in oil prices," said Hank Lim, a senior research fellow at the Singapore Institute of International Affairs. He added that the protests could lead to change in Yemen, Bahrain and even Saudi Arabia that could have positive economic impact in the long term "if they are carried out in a measured manner." The spike in oil prices could seriously impact advanced economies by next year, according to a study by the Organisation for Economic Cooperation and Development published Tuesday. It said that if the $25 per barrel increase in prices since the start of the year is sustained, "activity could be reduced by about 0.5 percentage points in the OECD area by 2012 and inflation could rise by 0.75 percentage points". Meanwhile on Wednesday, the US government's Department of Energy announced that crude oil inventories rose by 2.1 million barrels last week, above forecasts for a gain of 1.7 million barrels, according to Dow Jones Newswires said. At the same time, American gasoline (petrol) stockpiles dived by 5.3 million barrels, more than double market expectations for a decline of two million.