Oil spikes above US$104 on Middle East turmoil

World oil prices spiked this week to a two-year peak above US$104 per barrel, propelled by simmering tensions in the Middle East and North Africa, traders said.

Global financial markets were on edge amid violent protests from Bahrain to Libya, with tensions also heightened by Iran’s reported efforts to send naval ships into the Mediterranean.

“As anti-government protests have spread from Tunisia and Egypt to the streets of Bahrain, Yemen and OPEC member countries Algeria, Libya and Iran, concerns about geopolitical risk and the potential for supply disruptions have returned aggressively to the global oil market,” Deutsche Bank analyst Soozhana Choi said.

“While disruptions have not been reported thus far, immediate market fears center on the fact that these five countries — Bahrain, Yemen, Algeria, Libya and Iran — represent 10 percent of global crude oil production,” she added.

OIL: London Brent oil jumped to US$104.52 per barrel on Wednesday — the highest level since late September 2008 — after Israel said Iran was sending two warships into the eastern Mediterranean.

“The Middle East alone represents 30 percent of global crude oil production; including North Africa the region combined represents 35 percent of global crude oil production,” Choi said.

Since protests erupted in Egypt in late January, the price difference between the New York and Brent contracts has expanded dramatically.

By Friday afternoon on London’s Intercontinental Exchange, Brent North Sea crude for delivery in April stood at US$101.95 a barrel, compared with US$100.75 a week earlier for the March contract.

On the New York Mercantile Exchange, Texas light sweet crude for March delivery increased to US$87.14 a barrel from US$86.13.

PRECIOUS METALS: Gold hit the highest level since the middle of last month, while sister metal silver rocketed to a new 30-year peak, as investors sought a safe haven amid turmoil in the Middle East and fears over rising inflation.

“A mix of Middle East jitters and inflationary-driven rate-hike speculation continued to bolster the precious metals,” analyst James Moore at TheBullionDesk.com said.