Oil could hit $220 a barrel on Libya and Algeria fears, warns Nomura

Libya's descent into civil war has led to drastic cuts in oil shipments and prompted warnings that an escalation of the crisis could see Brent crude prices double to $220 a barrel.

Nomura's commodity team said oil prices risk vaulting to uncharted highs over coming weeks if chaos hits Algeria as well, reducing global spare capacity to the wafer-thin margins seen just before the first Gulf War.

On Wednesday, Brent crude rose more than 5pc to almost $112 a barrel, threatening levels that could derail the global economy. It closed at $111.25.

"We could see $220 a barrel should both Libya and Algeria halt oil production. We could be underestimating this as speculative activiites were largely not present in 1990-1991," said Michael Lo, the bank's oil strategist.

Read the rest here.