NEW YORK – Oil prices rose Wednesday as traders tried to gauge the impact that numerous international crises will have on world energy demand.
Benchmark crude for April delivery gained 80 cents to settle at $97.98 per barrel on the New York Mercantile Exchange. Oil rose as high as $99.60 earlier in the session. In London, Brent crude rose $2.10 to settle at $110.62 per barrel on the ICE Futures exchange.
A series of global events has rattled markets in the past several weeks, with Wednesday's focus shifting between Japan's crisis and rising tensions in Bahrain.
Analysts say oil prices will continue to have wild swings as perceptions shift about demand in the global economy. The price of benchmark crude has fallen after topping $105 a barrel earlier this month.
"There's just so much uncertainty," PFGBest analyst Phil Flynn said. "Everyone's trading emotionally."
Analyst Jim Ritterbusch said the global situation, particularly in the Middle East and North Africa, overshadowed disappointing U.S. economic news that new home construction fell to the second-lowest level on record in February and wholesale prices rose last month.
"There are just so many geopolitical and economic and political crosscurrents that the market shifts each day in an attempt to discount things," he said.
Here are some of the issues moving energy prices this week:
— In Bahrain, soldiers and riot police clashed with protesters demanding political reforms. Bahrain doesn't produce much oil but it is adjacent to Saudi Arabia, the world's biggest producer of oil. More than 1,000 Saudi-led troops entered Bahrain Monday to support the monarchy.
If the uprising grows, analysts fear it could spill across the border into Saudi Arabia and pose a threat to oil production there. So far protests have been minimal in Saudi Arabia. Experts also worry that another OPEC heavyweight, Iran, may be swept by uprisings. Saudi Arabia produces about 8.4 million barrels of oil per day, more than any country in the world. Iran produces 4.3 million barrels per day. Bahrain also is strategically important to the U.S. as home to the Navy's 5th Fleet.
"The Bahrain/Saudi situation is a powder keg," analyst and trader Stephen Schork said.
— In Libya, Moammar Gadhafi continued to pound rebel strongholds as the country's oil exports ground to a halt. Before the uprising, Libya produced about 1.6 million barrels per day, or nearly 2 percent of world demand. Saudi Arabia and other OPEC countries have increased production and say they can make up for the Libyan crude, most of which went to Europe.
— With homes and businesses destroyed by Japan's deadly earthquake and tsunami, energy demand is expected to initially decline in the world's third-largest economy. But economists say the country will need to boost imports of oil, natural gas and coal as it makes up for power lost from damaged nuclear facilities. Normally more than 50 nuclear reactors supply about 25 percent of Japan's electricity. Japan's nuclear agency says 13 reactors at four nuclear power stations are shut down.
The biggest share of Japan's power generation — around 28 percent — comes from coal-fired plants. Platts reports that five of those plants are shut down because of the earthquake, taking down about 10 percent of the country's coal-fired generating capacity. Japan also has generators that can run on liquefied natural gas (LNG) and crude oil.
To make up for the shortfall, Barclays Capital estimates that Japan will need to increase imports of coal by 7,800 tons per day and of fuel oil by 143,000 barrels per day. The country also will need an extra 67,000 barrels per day of crude and 800 million cubic feet per day of liquefied natural gas.
J.P. Morgan analysts think Japan will use 150,000 to 200,000 additional barrels of oil per day through August to meet peak summer power demand. Last summer Japan used over 300,000 barrels of oil per day to generate power.
The combination of events is raising doubts about world energy demand and supply this year. As an example, Swiss oil services company Weatherford International Ltd. said Tuesday that it could not provide earnings guidance for the full year because of a variety of issues, including political instability in the Middle East and North Africa.
Meanwhile, the U.S., the world's largest oil consumer, said its crude oil supplies grew by 1.7 million barrels last week, a little less than 2.1 million barrels analysts expected, according to Platts, the energy information arm of McGraw-Hill Cos.
At the pump, gas prices dropped for a second day Wednesday, though they're still at the highest levels ever for this time of year. The national average for a gallon of regular fell less than a penny to $3.553 per gallon, according to AAA, Wright Express and Oil Price Information Service. That's 42.7 cents more than a month ago and 76.6 cents higher than a year ago.
Analyst Ritterbusch said motorists should see some lower pump prices because of the drop in oil over the past week, but he speculated that prices could push above $4 a gallon by next month if oil prices remain volatile. Prices already are at $4 a gallon or higher in some areas, including Hawaii and California.
In other Nymex trading for April contracts, heating oil added 4.34 cents to settle at $2.9972 per gallon and gasoline futures gained 4.08 cents to settle at $2.8437 per gallon. Natural gas was down 0.3 cent to settle at $3.938 per 1,000 cubic feet.