Oil prices hovered above $97 a barrel Friday but were far from highs over $103 the day before amid signs the crisis in Libya may have cut supplies less than previously estimated and as Saudi Arabia seemed ready to boost output.
By early afternoon in Europe, benchmark crude for April delivery was up 42 cents at $97.70 a barrel in electronic trading on the New York Mercantile Exchange. Trading was volatile between $96.39 and $99.20. The contract on Thursday dropped 82 cents to settle at $97.28 after massive swings.
Oil climbed as high as $103 on Thursday before the International Energy Agency said that the violent uprising in Libya has forced oil companies to idle between 500,000 and 750,000 barrels per day of production, or less than 1 percent of global daily oil consumption. That's roughly half of what Italy's Eni, Libya's largest oilproducer, had estimated.
The Paris-based IEA also said it can make up for any lost shipments from Libya by tapping into large surpluses held by member countries, which include the U.S., the United Kingdom, France and Germany.
Saudi Arabia, the biggest crude producer of the Organization of Petroleum Exporting Countries, said that it would increase production to make up for any shortfalls due to unrest in Libya, if necessary.
A Saudi oil ministry official said the kingdom, in coordination with OPEC members, was ready to cover cuts from Libya. "We have a surplus of 2.5 million barrels a day," the official said on condition of anonymity in line with regulations.
Despite the highly volatile trading patterns, experts said expectations seemed to be diminishing that the uprisings in Egypt and Libya would spread to other oil-rich countries in the region.
"The market appears to be taking the loss of most Libyan barrels as a given but does not expect further problems," said analysts at JBC Energy in Vienna, adding that earlier concerns about the possible closure of the Suez Canal, a key transport route for oil tankers, were also ebbing.
Most of the eastern half of Libya has already broken away from the rule of Moammar Gadhafi, who has led the country for 41 years. Diplomats and ministers have also abandoned Gadhafi, who is believed to be firmly in control only of the capital, Tripoli, some towns around it, the far desert south and parts of Libya's sparsely populated center.
"Some form of military coup against Gadhafi seems inevitable," Capital Economics said. "Despite the bloodcurdling rhetoric, the Gadhafi regime appears to be crumbling and whoever takes over will surely want to restore business as usual as soon as possible."
In other Nymex trading in March contracts, heating oil rose 1.32 cents to $2.8905 a gallon and gasoline gained 0.53 cent to $2.722 a gallon. Natural gas futures were down 2.4 cents at $3.848 per 1,000 cubic feet.