Crude oil rises for 3rd weekly gain on geopolitical risk

Crude oil headed for its third straight weekly gain amid persistent fears over the ongoing political turbulence in the Middle-East and North Africa. At the same time, economic reports this week confirmed that the US economy was on the mend, stoking speculation of a pick-up in fuel demand from the world's largest energy consumer.



Oil fell slightly on Feb. 3 amid media reports that Libyan dictator Col. Muammar Gaddafi has agreed to a peace deal proposed by his close friend and Venezuela's President, Hugo Chavez. But, the plan was rejected by Libyan opposition leaders.

The continuing instability in the Middle East caused stock markets in the Gulf region to tumble. Saudi Arabia’s main share-price index fell to a 23-month low amid worries about the potential for unrest among the Shia population in the oil-producing east of the country, while the benchmark indices in Dubai and Kuwait hit six-year lows. Meanwhile, the chief economist at the International Energy Agency predicted that "the age of cheap oil is over". Brent crude traded at around $115 a barrel.

Fighting has cut crude production in Libya by as much as 1 million barrels a day, the IEA said. Libya, Africa’s third-largest producer, pumped 1.6 million barrels a day in January.

Public protests have already upstaged leaders in Tunisia and Egypt, and the unrest has spread to other countries like Iraq, Iran, Yemen and Oman.

Oil spiked on March 2 after Iranian protesters clashed with security forces in Tehran while demonstrations escalated in Oman. Iran is the second biggest producer in OPEC and Oman is the largest Middle East producer outside the group.

But, US Treasury Secretary Timothy F. Geithner said that the world has enough oil available to soften the blow of any disruption. Saudi Arabia said it is ready to supply incremental change in demand, to cover any shortfall from Libya.

Crude oil futures also rose on signs that the US economy is gaining strength and fuel demand is recovering. Service industries expanded in February at the fastest pace since 2005 and fewer Americans unexpectedly filed claims for jobless benefits, reports showed on March 3. Applications for unemployment benefits fell by 20,000 to 368,000 last week, beating estimates, Labor Department data showed.

A US government jobs report is likely to show that companies added more workers last month. US crude inventories dropped by 364,000 barrels to 346.4 million in the seven days ended Feb. 25, the first decline in seven weeks, a March 2 report from the Energy Department showed. A 750,000-barrel gain was projected by analysts.