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Oil up $2 to over $112 on MidEast unrest

26 March 2011 No Comment

Oil was up over $2 on Thursday as tensions in Saudi Arabia and Bahrain fuelled fears of further supply disruption while investors weighed the impact on energy demand from quake-hit Japan.

Brent crude for May, the front-month contract after April expired on Wednesday, was up $1.96 to $112.56 a barrel at 0935 GMT. Earlier it had fallen as much as 1 percent to $109.45 but then rebounded to an intraday high of $112.65.

U.S. crude rallied over $1 as London traders arrived at their desks, reaching an intraday high of $99.29 before slipping back to $99.24 a barrel.

“The market is seeing risks from the supply side and the demand side, and has to decide which is weighing more,” said Barbara Lambrecht, a commodity analyst at Commerzbank. “It is looking for orientation — I think we can expect more volatility.”

Prices had slid about 4 percent since Japan’s earthquake and tsunami six days ago, touching a three-week low of $107.35 on Wednesday. But increased tensions in the Middle East have helped prices rebound.

In Bahrain at least six opposition leaders have been arrested, a day after a crackdown on protests by the Shi’ite Muslim majority.

Bahraini forces used tanks and helicopters to drive protesters off the streets and clear a camp that had become a symbol of their demand for more democratic rights in the Sunni-ruled kingdom.

Bahrain lies less than 100 kms from the hub of the Saudi oil industry at Dhahran, including the world’s largest oil fields, oil terminal and processing plant.

“The demonstrations in Bahrain are a potential threat to Saudi Arabia,” said Thorbjorn Bak Jensen, oil market analyst at Global Risk Management.

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