Oil advances to 1-week high as unrest hits Iraq and Libya

By Grant Smith and Alex Longley

Oil rose to the highest in more than a week in London as supply disruptions in Iraq and Libya reignited concerns over the market’s vulnerability to geopolitical risk in key production regions.

Brent futures increased to more than $65 a barrel after Libya’s oil production almost ground to a halt as armed forces closed a critical pipeline, shuttering output from the nation’s biggest oil project. In fellow OPEC nation Iraq, escalating protests stopped work at a minor field on Sunday.

The latest incidents mark the second time this month that the market has been jolted by supply fears in OPEC nations, coming within weeks of a tense exchange between the U.S. and Iran that imperiled the region’s energy exports.

While the dramas have roiled markets, with Brent swinging between a trading range of $8 a barrel, prices are now little changed from the end of last year. Traders remain reassured by what the International Energy Agency calls a “solid base” of plentiful inventories and surging American shale-oil production.

“The amount of oil which is off is substantial, but right now the expectations are that it’s not going to last because it’s part of a negotiation process,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland.

“We are in this situation where you have some supply concerns if one looks at protests in Iraq and the situation in Libya, but on the other hand the products are weak.”