Oil rose to the highest in 29 months in New York as escalating violence in Libya renewed concern that supply disruptions may spread through the Middle East.
Crude gained as much as 2.3 percent after fighting between Libyan rebels and troops loyal to Muammar Qaddafi intensified. Hedge funds raised purchases of futures to an all-time high for a second week on speculation cuts will continue. Citigroup Inc. increased its Brent oil price estimate, saying the threat of more output disruptions supports a “fear premium.”
“High oil prices will be sustained over the coming days and weeks because there’s lots of uncertainty about how the situation in the Middle East will develop,” said Sintje Diek, an analyst at HSH Nordbank in Hamburg. “We do not know if riots will spill over to huge oil producers such as Saudi Arabia. There’s no quick solution to this situation.”
Crude for April delivery increased as much as $2.40 to $106.82 a barrel in electronic trading on the New York Mercantile Exchange, the highest price since Sept. 29, 2008. The contract was at $106.73 at 10:45 a.m. London time. Futures on Nymex rose 6.7 percent last week and are up 30 percent from a year earlier. Brent crude for April settlement gained $2.47, or 2.1 percent, to $118.44 a barrel on the London-based ICE Futures Europe exchange. The contract jumped 3.4 percent last week, the sixth weekly increase.