Oil soars on Libya violence, WTI shorts cover

LONDON/NEW YORK, (Reuters) – Brent crude oil prices  hit $108 a barrel for the first time since 2008 today 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 Sept. 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.