The main U.S. oil contract breached $110 a barrel for the first time in 2 1/2 years Thursday, lifted by fighting in Libya and signs of an economic recovery in the U.S.
Light, sweet crude for May delivery settled up $1.47, or 1.4 percent, at $110.30 a barrel on the New York Mercantile Exchange, the highest settlement since September 2008. Brent crude on the ICE futures exchange settled up 37 cents, or 0.3 percent, to $122.67, the highest settlement since August 2008.
Traders pointed to reports of damage to an oil field in Libya as a main driver behind this session’s rally. The North Atlantic Treaty Organization said skirmishes between rebels and forces loyal to Libyan leader Moammar Gadhafi led to “at least one fire at an oil facility in the region of Sarir,” according to Agence France-Presse.
“It seems sketchy,” said Andy Lebow, senior vice president at brokerage MF Global in New York, of the report. “But with crude relatively tight in the market, that’s just going to add more anxiety.”
Several traders added that the Nymex contract also breached technical levels around midday that, once hit, triggered a wave of buying that propelled prices to $110 a barrel.
“We’ve been pressing up technically,” said Peter Donovan, oil trader and vice president of Vantage Trading in New York. “There’s a mindset out there that this thing has got upside, upside, upside and not much downside, and sometimes that can be a self-fulfilling prophecy.”
Separately, a top U.S. general told a Senate hearing it was unlikely that Libyan rebels would be able to launch an assault against Tripoli and oust Gadhafi, according to AFP. The reports underscored concerns that the civil war was headed toward a stalemate.
Investors have been wary of betting on lower prices since the outbreak of fighting in Libya in mid-February. The civil war in the North African country has taken its 1.3 million barrels a day of exports off the market, spurring an oil rally over the last two months that has sent prices to their highest level since 2008.
The price of Brent crude, the benchmark used widely in Europe, rose more modestly than the Nymex contract due to the European Central Bank’s decision to raise its key interest rate.
Though the rate hike — a move often seen as crimping growth and oil demand — was widely expected, market watchers remain concerned about the pace of economic recovery in Europe. A deepening debt crisis has prompted a series of bailouts of countries on the euro zone periphery, with Portugal on Wednesday becoming the third country to accept such a rescue.
Nymex crude got an initial boost Thursday morning, after the Labor Department said fewer-than-expected U.S. workers applied for jobless benefits last week. The number of jobless claims fell 10,000 to a seasonally adjusted 382,000. Economists surveyed by Dow Jones Newswires had forecast claims would fall just 3,000.
Oil traders took the report as the latest sign that the U.S., the world’s largest crude consumer, remains on the recovery track. Last week, the Labor Department’s more closely watched nonfarm payrolls report showed the unemployment rate fell to 8.8% in March, the lowest in two years.
Front-month May reformulated gasoline blendstock, or RBOB, fell 0.64 cent, or 0.2 percent, to settle at $3.1865 a gallon. May heating oil gained 1.48 cents, or 0.5 percent, to settle at $3.2060 a gallon.
