PRICE OF OIL STABALIZES BUT GAS PRICES CONTINUE TO RISE

First off the price of oil has stabilized for now.

NEW YORK, Feb 25 (Reuters) - Equity markets rallied after a week-long selloff on Friday and crude prices eased from this week's peaks as Saudi Arabia boosted oil output to calm fears of supply disruptions sparked by the uprising in Libya.

Gold and bond prices rose, however, reflecting concerns that the uprising in Libya could spread to oil-producing countries in the Middle East and crimp global economic growth.

Saudi Arabia raised production about 8 percent to above 9 million barrels per day to make up for a near halt in Libyan exports, an industry source said, helping prices fall further from peaks last seen in 2008. For details see:[ID:nLDE71O1KA]
"The tensions in the Middle East seem to be less at the forefront of the market's mind. The initial panic seems to have subsided a bit," said Phil Gillett, a trader at Spreadex.

The Saudi move bolstered news that U.S. consumer sentiment rose to its highest level in three years in February, helping offset a bearish report that showed the U.S. economy grew slower than initially estimated in the fourth quarter. [ID:nN25299682] [ID:nN25247775]

The U.S. dollar rebounded against the euro but gold prices rose toward $1,410 an ounce and were on track for a fourth straight week of gains, supported by safe-haven demand.

However that may not last for long.

Oil production in Libya is expected to shut down completely and could be lost for a prolonged period of time, Bank of America Merrill Lynch said on Thursday.

"We expect Libyan production to be shut down completely and we might lose sweet crudes from Libya for a prolonged period of time," Bank of America Merrill Lynch analyst Sabine Schels told Reuters.

Schels said that the world faced the prospect of real supply shock in which the loss of 1.6 million barrels per day of sweet oil could potentially trigger a steep rise in prices and force a sharp reduction in demand to balance the system.

"Some of the supply can be replaced with Saudi light crude and some from SPR, but if the disruption is prolonged, we will need demand to drop to balance the system," Schels said.

  The bank is currently discussing scenarios and outlooks, and will publish a report on its findings in the coming days.

"We already faced a demand shock last year with global demand increasing by 2.8 million bpd and on top of that, what we have now is a real supply shock," Schels said.

"In a price shock scenario whereby we lose 1.6 million bpd, the rise in prices can be a lot greater than in the case of a demand shock.

Watch out folks this aint over yet as you get to deal with this at the pump.

                                        

Gas prices have finally caught up with soaring oil, jumping six cents overnight to a nationwide average of $3.29 cents a gallon, according to the American Automobile Association. Gas prices had already crept up another six cents earlier in the week, and experts expect further increases in the next few days.

If you havent already go on down and fill your tank up right now. The cost to fill it up increased six cents in 24 hours and we are no where near the big summer driving season yet.