Oil may surge to US$220 if Libya, Algeria halt exports, says Nomura

February 23, 2011

Source: BI-ME with Bloomberg , Author: Posted by BI-ME staff

Posted: Wed February 23, 2011 9:55 pm

INTERNATIONAL. Oil prices may surge to US$220 a barrel if political unrest in

North Africa halts exports from Libya and Algeria, Nomura Holdings Inc. said.

Crude futures rose to US$97.97 in New York today, the highest in more than two

years, as the violence in Libya threatened to disrupt exports from Africa's

third-biggest supplier.

Libyan leader Muammar Qaddafi vowed yesterday to fight a growing rebellion until

his " last drop of blood. " Protests in Algeria led to the ending of a 19-year

state of emergency.

" If Libya and Algeria were to halt oil production together, prices could peak

above US$220 a barrel and OPEC spare capacity will be reduced to 2.1 million

barrels a day, similar to levels seen during the Gulf war and when prices hit

US$147 in 2008, " the Tokyo-based bank said in a note today.

The Organization of Petroleum Exporting Countries has spare production capacity

of about 5 million barrels a day, according to the International Energy Agency.

Saudi Arabian Oil Minister Ali al-Naimi said yesterday that the organization

will boost output if there is a shortage. Algeria produced 1.25 million barrels

a day last month, while Libya pumped 1.59 million a day, according to data

compiled by Bloomberg.

Crude for April delivery was at US$97.40 a barrel as of 10:30 a.m. local time on

the New York Mercantile Exchange, the highest since October 2, 2008. Futures are

up 24% from a year ago. Brent oil for April settlement climbed 4.3%, to

US$110.35, on the ICE Futures Europe exchange.

" The closest comparison is the 1990-1991 Gulf War, " during which OPEC's spare

capacity dropped to 1.8 million barrels a day and prices surged 130 percent in

seven months, Nomura analysts led by Lo in Hong Kong said.

Nomura said the US$220 prediction may be an underestimate, as speculative

investors trading crude oil who were not active in the early 1990s may amplify

the price gain in the event of an export halt.

Total SA and OMV AG followed Eni SpA, RWE AG and BASF SE's Wintershall unit in

scaling back their Libyan operations this week. The moves have reduced

production by as much as 300,000 barrels a day, Vienna-based researcher JBC

Energy GmbH said in a report today.

Protests in Algeria, while not as violent as in Libya, led to the announcement

yesterday of an end to the state of emergency. The measure was imposed after the

cancellation of the country's first multiparty elections that Islamists were set

to win in 1992.

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