Oil prices have climbed after the U.S. led a series of air strikes against Libya.
Brent crude rose as much as US$2.26 to US$116.19 a barrel, while U.S. light crude rose as much as US$2.12 to US$103.19.
Libya is the world's twelfth-largest oil producer. There are concerns the conflict may affect crude supply.
Crude prices have been volatile in recent weeks as markets have dealt with a number of issues including the Japan earthquake.
Fear Factor
Since the start of the unrest in Libya, Saudi Arabia and other OPEC nations have assured that they are willing to increase their output and replace any loss in Libyan supplies.
These assurances helped calm markets a bit, but the air strikes on Libya over the weekend have once again stoked fears.
Analysts say that uncertainty about the future is driving market sentiment.
"I can see uncertainty and fear driving the price of oil higher in the short term," said Matthew Lewis of CMC Markets.
Mr Lewis also added that as long as a permanent solution to the Libya unrest was not achieved, oil price will remain volatile.
"At this stage, it looks like Libya has further to play. Gaddafi still seems very defiant," he said.
"We'll see further spikes and shocks in the oil market this week."
"Risk Premium"
The uprising in Libya is not the only concern that has got the markets worried about oil supply and prices.
The recent unrest in Bahrain is playing a major role as well.
"Even though Bahrain is not a major oil producer, its location if geographically critical," said Ong Yi Ling of Philip Futures.
Thera are concerns that the crisis in Bahrain could spread to other oil-producing nations in the Middle East affecting oil supplies.
Ms Ling said this uncertainity is being factored in by the markets.
"There is a Middle-East risk premium attached to the oil price," she said.
She warned that if the crisis did spread to other other oil producing nations, price could spike even further.
Brent crude rose as much as US$2.26 to US$116.19 a barrel, while U.S. light crude rose as much as US$2.12 to US$103.19.
Libya is the world's twelfth-largest oil producer. There are concerns the conflict may affect crude supply.
Crude prices have been volatile in recent weeks as markets have dealt with a number of issues including the Japan earthquake.
Fear Factor
Since the start of the unrest in Libya, Saudi Arabia and other OPEC nations have assured that they are willing to increase their output and replace any loss in Libyan supplies.
These assurances helped calm markets a bit, but the air strikes on Libya over the weekend have once again stoked fears.
Analysts say that uncertainty about the future is driving market sentiment.
"I can see uncertainty and fear driving the price of oil higher in the short term," said Matthew Lewis of CMC Markets.
Mr Lewis also added that as long as a permanent solution to the Libya unrest was not achieved, oil price will remain volatile.
"At this stage, it looks like Libya has further to play. Gaddafi still seems very defiant," he said.
"We'll see further spikes and shocks in the oil market this week."
"Risk Premium"
The uprising in Libya is not the only concern that has got the markets worried about oil supply and prices.
The recent unrest in Bahrain is playing a major role as well.
"Even though Bahrain is not a major oil producer, its location if geographically critical," said Ong Yi Ling of Philip Futures.
Thera are concerns that the crisis in Bahrain could spread to other oil-producing nations in the Middle East affecting oil supplies.
Ms Ling said this uncertainity is being factored in by the markets.
"There is a Middle-East risk premium attached to the oil price," she said.
She warned that if the crisis did spread to other other oil producing nations, price could spike even further.
