Brent oil price slumps as rebels surge into Tripoli

22nd August 2011, Comments 0 comments

Brent oil tumbled Monday on the prospects of a recovery in Libyan crude output as a rebel advance deep into Tripoli left leader Moamer Kadhafi facing the end-game after six months of violent unrest.

Brent North Sea crude for October delivery plunged $2.46 to $106.16 a barrel in late morning deals. But New York's main contract, light sweet crude for September delivery, added 46 cents to $82.72 a barrel, with its direction more linked to the health of US supplies.

"Libya seems to have entered the final stage of toppling Kadhafi's regime," VTB Capital analyst Andrey Kryuchenkov told AFP.

"Even though it is unlikely we shall see a return to pre-uprising output levels before year-end, still it is a substantial progress after months of stalemate."

Fighting raged on Monday near the compound of Kadhafi and in other parts of Tripoli, witnesses said, a day after jubilant rebels overran the symbolic heart of the capital.

"Rebel leaders (have) already expressed their desire to restart production as soon as (possible)," added Kryuchenkov.

"Naturally, much will depend on how damaged the infrastructure is but the country will need oil revenues to rebuild."

Libya, a key African oil exporter, produced about 1.6 million barrels per day (bpd) before the rebellion broke out in mid-February but has since seen its output slow to a trickle since the revolt.

That pushed up Brent prices because this type of oil is of a similar quality to Libyan crude while New York oil prices are more linked to the US market and supplies.

"With Kadhafi's days and hours numbered, oil could slowly start to flow into the market again within months even though there is no guarantee that the security situation in the country will change much for the better after Kadhafi has been toppled," SEB commodity strategist Filip Petersson said.

The gap between Brent and New York oil prices hit a record $26 late last week.

"In addition to sharply lower prices this morning the spread between WTI and Brent has also diminished as the tight Brent market could potentially ease slightly with Libyan oil," added Petersson.

Around 85 percent of Libyan oil output was exported to Europe until the revolt disrupted the country's production.

Brent crude from the North Sea would be particularly affected by the likelihood of Libya gradually resuming supplies to the European market, analysts said.

"The impact of that on the oil market should be bearish because going forward, Libyan oil production will come back on stream and that should put downward pressure on oil," said analyst Victor Shum at consultancy Purvin and Gertz.

"It's really the geopolitical issue in Libya on top of all the other macroeconomic factors."


© 2011 AFP

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