(EnergyAsia, April 29 2011, Friday) — OPEC said its reference basket price rose sharply to US$120 a barrel in late April, its highest level since 2008, capping a run of seven consecutive months of price increase. The reference price averaged nearly US$110 in March, and just over US$100 in February, showing the strength of the market’s rise since the start of the year.
Prices spiked in February when war began to disrupt production in Libya and political unrest began to spread to other producing nations in the Middle East and North Africa (MENA).
Given the quality of Libyan crude, the market has widened the premium placed on light, low-sulphur grades. But the loss of Libyan crude has not been sufficiently compensated by higher output from OPEC member countries.
As a result, OPEC said the cartel’s estimated production in March fell slightly to 29.3 million b/d from the levels seen in December before the onset of unrest in the MENA region.
“Supply concerns, and the associated risk premium, were later dampened to some degree by the triple catastrophe in Japan of the earthquake, tsunami and nuclear problems, which has led to disruption in the Japanese energy complex.
OPEC said: “The overall impact of the tragic events in Japan on oil consumption is far from clear. While the devastating earthquake caused a sudden decline in the country’s use of oil, this is likely to be broadly offset by the need to substitute some of its shut-in nuclear power capacity with oil-based generation. With the start of reconstruction efforts, estimated at US$300 billion, this is expected to require even higher energy use.”