As crude prices hit a two and a half year high on concerns the revolt in Libya could spread to other major oil producers, the International Energy Agency is warning that poses a danger to global economic recovery.
The IEA’s chief economist Fatih Birol said industrialised countries are standing ready to release oil from stockpiles to compensate for Middle East supply disruptions.
OPEC is reportedly considering calling an emergency meeting to discuss raising oil output.
Oil prices jumped eight percent in New York as soon as trading started there on Tuesday morning after a one day public holiday on Monday.
Investors fear further disruption both in Libya and beyond as protests grip the North Africa and the Middle East, the world’s top oil producing region.
A wave of protests across North Africa has had little impact on oil supply until now. The outages in Libya this week are the first to impact supply.
Michael Hewson, an analyst at CMC Markets, said: “Until the situation in the Middle East settles down, you are going to have very wild price swings.”
On Tuesday the violence in Libya led one oil company there to shut in 100,000 barrels per day (bpd) of the country’s 1.6 million bpd output.
OPEC has spare capacity of up to six million barrels, so even if all exports were stopped this would not create a supply shortage, said Carsten Fritsch, an analyst at Commerzbank.
“It is more fears that this might spread to places like Algeria, Kuwait or the United Arab Emirates,” he said.