Oil Settles above 102 U.S. Dollars

Crude oil prices ended higher on Wednesday with U.S. oil settled above 100 U.S. dollars a barrel for the first time since September 2008, as continuing violence in Libya weighted in the markets.

New York crude benchmark for April delivery rose 2.60 dollars, or 2.61 percent to settle at 102.23 dollars a barrel, registering a rise of 5.42 percent for the first two days of March and about 20 percent rise since Libya's turmoil broke out.

In London, Brent North Sea crude for April delivery added 93 cents to 116.35 dollars a barrel, its highest level since August 2008. Brent crude surged 4.07 percent in the last two days.

Traders and investors on Wednesday still focused on the situation in the North Africa and Middle East. And there were signals that oil supply was in danger as violence in Libya got intensified. The markets were extremely nervous, which pushed oil prices to climb.

On Wednesday, the situation in Libya grew increasingly tense as airstrikes happened near Brega, the very important oil port in the OPEC member state. Traders could not get any further accurate information about the damage, but they reacted in a panic way.

The International Energy Agency said on Wednesday, based on available information, it would appear that between 850,000 to 1 million barrels per day out of a total of 1.6 million barrels per day of Libyan oil production was currently shut-in.

Although the world biggest oil exporter Saudi Arabia pledged to make up any supply shortfall caused by the output disruption in Libya, analysts said its oil quality was different from Libya's oil. According to experts, because of different sulphur level, it needs 3 barrels of Saudi oil to replace 1 barrel Libyan oil, and some refineries can even not use the Saudi oil because of lacking desulfuration technique.

"Libya's reserve of the prized 'sweet' grade of crude oil is recognized as the largest in Africa. The interruption of supply will likely be translated into increased competition for this grade of crude which is highly favored by U.S. refiners," said Conley Turner, senior analyst at Wall Street Strategies.

Meanwhile, the Energy Information Administration reported on Wednesday the U.S. crude inventories dropped 400,000 barrels to 346.4 million barrels in the week ended Feb. 25, ending the six weeks of straight rise. And the reserves for gasoline and distillates also fell.

A Federal Reserve survey released on the same day showed the U. S. economy has gained strength. And the Automatic Data Processing Inc's monthly report said private employers added more-than- expected 217,000 jobs in February, also signs for the biggest oil consumer's economic strength.

Experts expected oil price would keep rising as supply disrupted at the time of demand picking up.