December 3, 2023

Stocks & Bonds: Shares Slip as Oil Prices Jump on Libya Tensions

Crude prices have surged as the fighting in Libya, an OPEC member, has appeared to turn into stalemate, analysts said.

“What you really have is fear and the unknown running ahead of the facts,” said Mark  Routt, a senior staff consultant with KBC Advanced Technologies, a consulting firm.

On Friday, crude oil for May delivery rose $2.49, or 2.3 percent, to $112.79 a barrel on the New York Mercantile Exchange, while Brent crude jumped $3.98, or 3.2 percent, to $126.65.

A weaker dollar also kept prices elevated, and energy shares on Wall Street closed higher. But the biggest driver of oil prices was a growing perception among traders that the conflict in Libya might not end any time soon, KBC said in an energy outlook.

Blake Hutchinson, an oil field services analyst at Howard Weil, said that the markets had “written off” Libyan production. Reports of damage to oil fields have heightened fears that output could be disrupted for longer than initially forecast, possibly for years.

“When you kill an oil field, sometimes you kill it for good,” Mr. Hutchinson said. “You have gone from production offline” to production that might never exist again.

Mr. Routt of KBC said that “until we get a technical assessment of the damage, we are not going to know what the impact is going to be, and until we get that knowledge the markets are running ahead of themselves.”

Since the beginning of the turmoil in Libya, Saudi Arabia, along with its gulf neighbors, the United Arab Emirates and Kuwait, have raised production to offset the loss of Libyan oil exports.

But the increase has done nothing to dampen oil prices, the KBC analysis said, because traders are worried about the political stability of many Middle Eastern states, which are among the largest producers in the Organization of the Petroleum Exporting Countries.

Stock prices closed moderately lower on Friday as investors monitored energy and currency markets.

The Dow Jones industrial average fell 29.44 points, or 0.24 percent, at 12,380.05, while the broader Standard Poor’s 500-stock index lost 5.34 points, or 0.40 percent, to 1,328.17. The Nasdaq composite index declined 15.72 points, or 0.56 percent, to 2,780.42.

The Dow was little changed on the week, while the S. P. and the Nasdaq were slightly lower.

Energy shares bucked the market trend to close higher.

The oil drilling company Nabors Industries rose $1.06, or 3.48 percent, to close at $31.56. A rival, Helmerich Payne, gained $1.44, or 2.13 percent, to $68.94, and Anadarko Petroleum was up $1.37, or 1.64 percent, to $84.71.

Amid a threatened government shutdown in the United States, the dollar weakened. The euro rose to $1.4435 from $1.4297 on Thursday.

Interest rates were higher. The Treasury’s benchmark 10-year note fell 9/32, to 100 12/32, and the yield rose to 3.58 percent from 3.55 percent on Thursday.

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