Oil Prices Climb Again, Wall Street Sweet and Sour
Source: New York Times, Matthew Saltmarsh (2/24/11)
"Clamor for sweet crude may push already rising U.S. prices up."
Shares on Wall Street trading were mixed Thursday, while Asian and European shares were mostly lower. Indexes on the Continent, however, rallied somewhat as oil prices eased.
The benchmark light, sweet crude futures contract touched the key $100 a barrel level in New York on Wednesday for the first time since September 2008. On Thursday, the April contract was at $100.91 in premarket trading but slipped back to $99.28 in early trading.
The Dow Jones industrial average was down 32.74 points or 0.27%. The broader Standard & Poor's 500-stock index was flat. The Nasdaq gained 7.11 points or 0.27%.
The main focus in the markets Thursday was again on the world's top exporter, Saudi Arabia. Analysts said the oil price rise was checked after news reports cited unnamed Saudi officials saying the country would supply oil to replace Libya's disrupted supply if needed.
But that switch will not be seamless for European and Asian refineries. While Libya produces less than 2% of the world's oil, Libya's "sweet" crude oil cannot be easily replaced, particularly by the many European and Asian refineries that are not equipped to refine "sour" crude. Saudi Arabia has more than four million barrels of spare capacity, but mostly for sour grades of oil.
Should the turmoil in Libya last for more than a few weeks, oil experts predict European refiners will be forced to buy sweet crude from Algeria and Nigeria, principal sources of sweet crude for the U.S., probably pushing up already rising American gasoline prices.
Oil companies in Libya continued to scale back operations. Paolo Scaroni, CEO of Italian oil giant ENI, commented that Libyan turmoil cut the country's oil output by 75%.