Brent crude oil prices hit $108 a barrel for the first time since 2008 on Monday on fears that spiraling violence in Libya could lead to wider supply disruptions from the OPEC member.
U.S. oil prices led the rally to jump by more than $5, the most in over two years, as traders also rushed to cover short positions in the key Brent/WTI spread, which had blown out to a record $16 a barrel. The April spread narrowed to $10 during the day, but widened to over $12 in after-hours trade.
The focus was on deadly clashes in Libya, where one oil firm was shutting down some 100,000 barrels per day (bpd) of production and others evacuated staff. The leader of the Al-Zuwayya tribe threatened oil exports to the West would be cut off unless authorities stopped violence.
"The market is on edge about the potential for Middle East and North Africa supply disruptions," said Mike Wittner, head of commodities research, Americas, at Societe Generale.
"If you've got reports that actual disruptions are starting to occur, it's going to have a supportive impact. A lot of it is high-quality crude and that is important as well."
The increasingly violent protests that appeared to put Muammar Gaddafi's four decades of rule in jeopardy were the realization of weeks of mounting concerns that Egypt-inspired unrest would seep into nearby oil producers.
Brent oil futures, which have climbed more than $10 this year largely due to the increasing geopolitical risk premium, jumped $3.22 a barrel, or 3.2 percent, to settle at $105.74 a barrel. They jumped another $2 to trade as high as $108 in after-hours dealing, the highest since September 4, 2008.
The March U.S. crude oil contract, which expires on Tuesday, surged $5.22 a barrel to trade at $91.42 a barrel in late-afternoon activity -- the highest in two weeks.
Overall trading volume was less than one-third the 30-day average due to the U.S. Presidents Day holiday, and the U.S. market won't issue an official settlement until Tuesday.
The more-active April contract jumped as much as $5.75 to a high of $95.47 a barrel, at one point narrowing the Brent/WTI contract by nearly $3 to $10 a barrel as traders covered short positions built up as the spread ballooned from about $3 in January to a low of $16 last week.
Brent's after-hours rally forced the spread back out to $12.40 a barrel. (more)
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