Oil prices soar to 30-month high

Oil prices have climbed to their highest level in 30 months in London as Libya’s uprising reduced shipments and sparked fears of unrest spreading across the Middle East.

Brent crude hit 119 US dollars a barrel for the first time since August 2008, while benchmark crude for April delivery on the New York Mercantile Exchange was up nearly four dollars at 101.67 US dollars.

Major Western oil companies, such as Italian firm Eni and Spain’s Repsol-YPF, have suspended production, while British giant BP has evacuated staff.

Ongoing fears over the impact of soaring oil prices on economic prospects meant the FTSE 100 Index fell by 1% at one stage on Thursday.

Meanwhile, a group of petrol retailers predicted the rise in Brent crude will filter through to British forecourts in the next few weeks, leading to an estimated 5p per litre increase by April 1.

Brian Madderson, chairman of RMI Petrol, the petrol retailers’ association, said: “This is further bad news for motorists and forecourts as this increase looks set to coincide with the introduction of the previous government’s ill thought-out fuel duty escalator adding a further 5p per litre at the pump – in total a 10p per litre jump.”

Some analysts fear Nymex crude could break its 2008 record of around 147 US dollars if the political unrest spreads to countries such as Iran and Saudi Arabia.

Michael Hewson, an analyst at CMC Markets, said oil prices were being pushed up by a combination of restricted production and speculation.

“There has been disruption to production – but Libya accounts for only 2% of the world’s oil supply,” he said. “However, Europe takes about 50% of its oil from Libya and will have to source oil from elsewhere and possibly pay more for it.”

He added: “The real concern is that Opec (Organisation of the Petroleum Exporting Countries) won’t be able to step up production if the contagion spreads to Saudi Arabia. Libya is just one piece of the puzzle.”