Price of Oil Hits $100 a Barrel

The price for a barrel of oil rose above $100 Friday amid concerns over instability in Libya and South Sudan, plus a growing U.S. demand for fuel.

Fighting in South Sudan and erratic oil production in Libya are having a ripple effect on the global oil market.

John Kingston, director of news for Platts, a leading energy information company, said, "The big, broad, fundamental picture does look like there’s more oil on the world [market] than is necessary. But you continue to have several hotspots that are keeping the market tight and keeping the market a little bit on edge. Libyan output's been fluctuating. Sometimes it gets almost up to 500,000 barrels a day. Sometimes it's closer to 100,000 barrels a day. But this is a country that should be producing about 1.5 -1.6-million barrels a day. Now you’ve got South Sudan, which is a relatively small producer, but again it could be a cutback in a market that does have a lot of these geo-political concerns."

Some of the fighting in South Sudan is in Unity State, which produces about 45,000 to 50,000 barrels a day. That's out of a total output for South Sudan of 250,000 barrels a day. Kingston said that's a relatively small output compared to other oil producing nations. Nevertheless, he said the combination of problems in the two countries has affected the market.

"You've also got other things," he said, "You've got rising interest rates, which tend to be a booster of commodities. U.S. demand is starting to show real signs of strength. It's up about a million barrels a day -- year on year -- and the estimates now are that fourth quarter growth in GDP might be three to four percent, which is pretty strong. So, you throw all these together in this plunging market that everyone was talking about a few weeks ago, a month ago, it’s got too many things that are preventing it from plunging."

Kingston said that the oil market is not like the stock market, which can fluctuate wildly upon hearing rumors.

"Any kind of commodity market -- the net gain at the end of the day is zero. For every dollar made there's a dollar lost. So that's not the case in Wall Street. So, that's why I always push back very hard in any kind of analogy to Wall Street. But certainly it's not so much that there are rumors, there are real outages of supply. And even though if you sat down and did the percentages it would look really, really small, the fact is markets are not set by percentages they're set on the margin. What is the competition for that last barrel of oil?"

Kingston said that Platts will not predict how long the price of a barrel of oil may hover around the $100 level.

VOA News / Dec. 28, 2013 08:43 KST