Libyan threat to sink tankers pushes oil price higher

Oil prices moved higher Wednesday due to an escalating conflict in Libya, afterPrime Minister Ali Zeidanwarned oil tankers to stay away from eastern terminals seized by armed protesters or they could be sunk.

The European benchmarkwas up another 51 cents to $107.86 on Wednesday morning after Zeidan'scomments, which themselves cameafter Libya's navy fired warning shots overthe weekend to ward off a tanker that the state-run National Oil Corp. (NOC) said had attempted to load crude at one port that has been out of government control for six months.

We will deal with them, even if we are forced to destroy or sink them.- AliZeidan, Libya prime minister

The self-proclaimedCyrenaicaregional government in the eastern part of the country has taken over three ports:RasLanuf, EsSiderandZueitina. Before the recent conflict, those three ports were shipping 600,000 barrels of crude oil per day.

"Any country or company or gang trying to send tankers to take oil from the seized ports without co-ordinating with theNOC, we will deal with them, even if we are forced to destroy or sink them,"Zeidansaid Wednesday. "We warn all countries there will be no leniency."

Simmering conflict

Negotiations to end the protests have failed as eastern federalists, seeking more autonomy from Zeidan's government in Tripoli, have threatened to ship oil independently to world markets.

Protesters on Tuesday said they would guarantee security for vessels docking at the three eastern ports that they have held since summer, inviting foreign tankers to load crude and bypass government control.

On the other side of the Atlantic, North American oil prices also increased as demand for energy to cope with the continent-wide cold snap pushed the price of the North American benchmark oil over $94.

Much of North America has been experiencing temperatures as much as 20 degrees below seasonal this week, and that's driving up costs for all types of fossil fuels.

In addition to more demand for energy to produce heat, prices of the underlying energy commodities are also higher because the sub-zero temperatures are disrupting infrastructure, freezing pipelines and knocking some processing facilities offline.

"The big freeze in the U.S. hit some of the refinery oil operations, causing a short-term shutting down that helped crude oil prices to move higher," a note to clients from Sucden Financial Research said.