Oil prices surged Tuesday after a protest in Libya shut down one of the nation’s crude-export hubs and Saudi Arabia’s national oil company raised prices for the US and Europe, a bullish signal of strengthening demand.

The day’s developments extended the surging bull market for oil — even as analysts cautioned that market prices and investor optimism were decoupled from the realities of weak supply and demand fundamentals — with the US contract up more than 35 per cent from its recent low set on March 17, and the global benchmark up more than 40 per cent from its January low.

“The market is starting to get a little overextended,” said Gene McGillian, a senior analyst at futures brokerage Tradition Energy in Stamford, Conn. “The only kind of news people watch is what could be considered bullish, and that’s why we’re continuing to move higher.”

The US benchmark oil contract broke above $US60 a barrel for the first time since December, recently trading up $US1.52, or 2.6 per cent, at $US60.45 a barrel on the New York Mercantile Exchange. The global Brent contract was up $US1.32, or 2 per cent, at $US67.77 a barrel on the ICE Futures Europe exchange.

In Libya, the oil port of Zueitina was shut down by protesters seeking jobs at the facility, a Libyan oil official told The Wall Street Journal. The port has capacity to export up to 70,000 barrels a day. Libya’s oil exports played a key role in the market price collapse of the last 11 months as they surged past expectations, but have since fallen back to about 500,000 barrels a day — about a third of capacity — amid civil strife and a battle for control over the central government.

“The market continues to live with these supply disruptions out of Libya that we see from month to month,” said Andy Lipow, president of Houston research consultancy Lipow Oil Associates. “The port closure is bullish for a market that remains oversupplied.”

Also Tuesday, Saudi Aramco raised prices for its oil sales to Europe and North America, a signal that it senses strong crude demand as refineries come back online after maintenance season with plans to ramp up production to meet summer driving demand.

While investors have poured back into the crude market in recent weeks in anticipation that prices would recover as surging US production eventually tapers off, analysts caution that supply and demand remain out of whack. Nigerian cargoes are going unsold in the physical market, which has dragged down pricing for other physical grades out of the Middle East and the North Sea. Though Chinese buying to fill reserves has been strong, inventories remain at record highs in the US

“Not much has changed in the oil market,” London research consultancy Energy Aspects said in a note. “Near-term fundamentals continue to look dire.”

Still, the market was anticipating bullish signals from weekly US inventory data, scheduled to be released late Tuesday by industry trade group American Petroleum Institute and by the US Department of Energy on Wednesday.

Diesel futures entered bull-market territory, climbing 20 per cent from their March 17 low of $US1.6895 a gallon. The June contract was recently up 4.83 cents, or 2.4 per cent, to $US2.0270 a gallon. Gasoline futures rose 3.2 cents, or 1.6 per cent, to $US2.0659 a gallon.

Extracted in full from the Daily Telegraph.